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Minnesota governor revises, brings back tax bill that had $101 million mistake

Minnesota Gov. Mark Dayton explains on Thursday, Jan. 5, 2017, that he wants legislators to consider a bill providing $300 million in tax relief. (Forum News Service photo by Don Davis)

ST. PAUL -- A tweaked 2016 tax proposal that never made it into law is back.

Minnesota Gov. Mark Dayton said on Thursday that his plan calls for $230 million in a variety of tax cuts and $70 million in new spending for things such as increased state aid to local governments. It is based on a bill most legislators backed last year, but Dayton opted not to sign after a $101 million mistake was discovered in it.

The Democratic governor claims nearly a half million people would receive tax relief from his plan, announced on the third day of the 2017 legislative session. Republicans, on the other hand, say they will counter with plans to give every Minnesotan a tax break and increase how much is returned to taxpayers.

Dayton and Republicans agree their focus will be on the middle class. Dayton said, for instance, that his plan reinforces the existing working family tax credit and provides tax relief for parents paying for child care.

"This is a tax bill that really is going to benefit Minnesota families," Lt. Gov. Tina Smith said.

She said one feature of the bill, popular when it was considered last year, would reduce farmland property taxes that pay for new school buildings by 40 percent. That includes existing levies, not just new ones, Revenue Commissioner Cynthia Bauerly said.

"It is a way to reduce their property tax burden while prices remain as terribly low as they are," Smith said, as well as helping get voters to approve new school facilities.

Sam Walseth of the Minnesota Rural Education Association said that if the provision becomes law the number of rural school districts able to receive voter approval for buildings could double. Farmers often hesitate supporting such votes because they feel they shoulder too much of the financial burden of construction.

The Dayton proposal would use state money to replace 40 percent of construction costs levied on farmland.

"There is a large, pent-up demand," Walseth said, predicting many districts could seek voter approval for construction if the provision becomes law.

Besides directly cutting taxes, the measure would increase state aid to cities by $20 million in the next two years and counties $10 million.

Dayton’s proposal is less than half of the $45.5 million goal the Coalition of Greater Minnesota Cities has sought since last year. City leaders said the larger amount would return Local Government Aid to 2002 levels.

Alexandria Mayor Sara Carlson, coalition president, said the missed mark for the LGA increase would hurt smaller communities surrounding Alexandria. She said the organization intends to negotiate with legislators to boost the amount.

Republican leadership may pose a challenge to groups aiming for more spending, but Bradley Peterson, coalition senior lobbyist, said he is optimistic about nearing their $45.5 million goal.

"We’re talking about the wellbeing of communities that are largely represented by Republicans," he said, and the GOP controls the House and Senate.

Overall, Republicans say they expect to pass more tax cuts than Dayton suggested.

Senate Tax Chairman Roger Chamberlain, R-Blaine, said the governor's plan is "incredibly small."

House Tax Chairman Greg Davids, R-Preston, called the Dayton plan "promising." However, like Chamberlain, he said he expects more tax breaks to pass the Legislature.

One item missing from the Dayton plan that passed in 2016's legislation is a break for students who have college loans. Davids said he wants that put in the 2017 bill.

While lawmakers considered overall tax legislation, House members unanimously passed a bill to closer match state tax policy with the federal government to make it easier for Minnesotans to file income tax returns. Dayton's office said the bill could save taxpayers $21 million.

Don Davis
Don Davis has been the Forum Communications Minnesota Capitol Bureau chief since 2001, covering state government and politics for two dozen newspapers in the state. Don also blogs at Capital Chatter on Areavoices.
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