Senate passes tax bill after rejecting tax bill

By Tim BudigECM Capitol Reporter

The Democratic-led Senate passed its tax bill Monday (April 29) but only after crashing it.

The bill, which raises about $1.8 billion in new taxes, was debated several hours before coming to a vote. In a spectacle rarely seen with major bills, the Senate tax bill failed on a 32 to 34 vote.

Sen. Paul Gazelka, left, R-Cass County, works the laptop while Sen. Warren Limmer, R-Maple Grove, watches a vote.
Sen. Paul Gazelka, left, R-Cass County, works the laptop while Sen. Warren Limmer, R-Maple Grove, watches a vote.

Seven Senate Democrats, including suburban senators Terri Bonoff of Minnetonka, Greg Clausen of Apple Valley, Melisa Franzen of Edina, John Hoffman of Champlin, and Bev Scalze of Little Canada, voted against the bill.

“Let’s leave it lie. It’s dead,” Senate Minority Leader David Hann, R-Eden Prairie, said when Senate Democrats, in a procedural move, brought the bill back for reconsideration after a hasty caucus meeting.

“Be brave,” Sen. Julianne Ortman, R-Chanhassen, urged the seven Democrats.

But assisted by Clausen and Hoffman switching their votes, the tax bill passed on a 35 – 31 vote.

Senate Majority Leader Tom Bakk, DFL-Cook, explained the initial failure to the “premature” closure of the vote board and confusion caused by Senate Republicans switching their votes back and forth prior to voting.

“That’s what happened,” Bakk said.

Several Democrats, without any concession being made, volunteered to change their votes, Bakk said.

The Senate tax bill raises less money than the Democratic-led House tax bill and is markedly different.

The Senate proposes to raise the income tax on the upper 7 percent of Minnesotans — married-joint filers with taxable incomes of $140,961, singles with taxable incomes of $79,731 — to raise $1.2 billion over the next two years.

Both Democratic Gov. Mark Dayton and House Democrats propose their income tax increase on a narrower ban of the wealthy.

Senate Democrats also propose expanding, while lowering, the state sales tax. They would decrease the current 6.87 percent sales tax to 6 percent, while extending it to the purchase of clothing, haircuts, other products and services.

To lessen the bite to families, Senate Democrats propose a clothing tax credit.

Like the governor and House Democrats, Senate Democrats propose a tobacco tax increase.

This would kick up the price of a pack of cigarettes by 94 cents, less than what the House is proposing.

Wisconsin and Iowa currently have higher cigarette taxes, North Dakota, at 44 cents, much lower.

Sen. Warren Limmer, R-Maple Grove, styled increasing the cigarette tax an invitation to illegal sales.

Senate Democrats propose lowering the corporate tax rate from 9.8 percent to 9 percent. They would close perceived corporate tax loopholes, raising more than $200 million over the upcoming biennium.

Senate Democrats propose a 13 percent sports memorabilia sales tax that would capture $32 million over two years — dollars that could help fund the Vikings stadium.

In helping cities, Senate Democrats, besides advancing a new local government aid formula, include a sales tax exemption to cities, saving local government about $200 million.

Unlike the governor and House Democrats, Senate Democrats propose paying cash for ongoing State Capitol renovations instead of bonding.

They include $109 million in their tax bill for the upgrade.

The Senate tax bill offers sales tax exemption for construction material for a biopharmaceutical manufacturing facility in Brooklyn Park, under certain conditions, and contains Rochester Destination Medical Center provisions.

Senate Republicans blasted the bill, Sen. Paul Gazelka, R-Cass County, reciting lyrics from the Beatles’ song “Taxman” with Ortman calling Democratic promises of property tax relief “bogus.”

Sen. Mary Kiffmeyer, R-Big Lake, called the legislation “a big, honking tax bill,” while Hann styled the bill “simply indefensible.”

Republicans argue Senate Democrats are raising three times the money needed to cover the $627 million state budget deficit.

But Senate Tax Committee Chairman Rod Skoe, DFL-Clearbrook, said achieving tax reform isn’t easy.

“No one said it would be without controversy,” Skoe said.

While Republican offered only a handful of amendments, Sen. Karin Housley, R-Stillwater, successfully amended a school district operating referendum freeze for operating referendums expiring in fiscal year 2015.

Housley’s amendment grants the Stillwater School District leeway with a proposed referendum.

One Senate Republican, Sen. David Senjem, R-Rochester, voted for the tax bill because of the destination medical center provision in it.

Asked how the governor feels about the Senate tax bill, Dayton Press Secretary Katharine Tinucci said the governor had laid out his priorities in his budget proposal, including raising revenue fairly by having the richest Minnesotans pay their “fair share.”

“The governor has been clear from the start that he is not interested in raising taxes on middle-class Minnesotans,” Tinucci said.

“I expect this will be his top priority as he negotiates a tax bill with the House and Senate in the coming weeks,” she said in an e-mail.