About 1 million Minnesotans stand to reap more than $500 million in tax breaks under a new proposal blazing through the state House.
Taxes would drop for an estimated 650,000 married couples across the state, by an average of $120. Low-income families, those who lost their homes to foreclosure and students with college loans also would see tax relief.
Business would also get a boon: The proposal would repeal three new business sales taxes on warehousing services and telecommunications equipment and repair — levies that drew outrage from business groups.
Many of the proposals are retroactive to 2013, so House members feel a strong sense of urgency to pass the measure before Tax Day on April 15, sparing taxpayers the need to file amended returns. Legislators also are up against an April 1 deadline, when the new warehousing tax kicks in.
“There is pressure on the governor and the whole Legislature to act to make the lives of Minnesotans easier,” said House Speaker Paul Thissen, DFL-Minneapolis. “If we are able to change the law quickly, they will be able to adapt to that before they have to file their tax returns.”
The measure passed unanimously in the House Taxes Committee on Thursday, a sign that election-year politics has created a rare bit of common ground for DFLers and Republicans and put the tax relief measure on a fast track. A final House vote could come as early as next week, sending the measure to the Senate for final consideration.
“I am feeling a real need for speed here,” said Preston Rep. Greg Davids, the lead Republican on the tax committee.
Nearly a third of returns filed
As of Wednesday, 815,831 Minnesotans had filed their returns, according to the Minnesota Department of Revenue. That accounts for about 30 percent of all anticipated tax filings.
House members are so eager to provide the tax relief, they are rushing the package forward even before Friday’s new economic forecast, which will provide a snapshot of the local economy and set a budget number for state leaders to live by.
Legislators are banking on a giant surplus to pay for the tax relief, which has to be booked as spending in a state budget.
State leaders have reason for optimism. Minnesota’s tax revenue collections have outpaced projections the last few months, giving legislators reason to believe the budget surplus could reach $1 billion or more.
Minnesota Management and Budget Commissioner Jim Schowalter said the economy “continues to steam along,” and he has an upbeat outlook.
“I don’t want to get too much irrational exuberance here, but things are going well,” he said.
Schowalter said the new, two-year federal budget deal has ushered in a fresh confidence after years of repeated budget and debt ceiling showdowns in Washington.
“There is no budget crisis, and that helps people plan and understand where they are at,” Schowalter said.
Minnesota’s economy continues to outpace the nation, he said, and “there doesn’t seem to be any signs of that slowing down.”
Depending on the size of the projected surplus, even $500 million in tax relief could leave legislators with a significant chunk of money to boost rainy day funds or add spending or even more tax cuts.
What for years has been a predictable Capitol fight between taxing and cutting has given way to a more nuanced battle between giving the money back, spending it on programs or throwing it in the budget reserves.
Many Republicans are pressing hard to give the money back to taxpayers. They say the new tax relief proposals simply amount to Democrats trying to take credit for lowering or cutting taxes that never should have been raised in the first place.
“It corrects mistakes that the Democrats made last session in raising taxes on the working families,” said state Rep. Pat Garofalo, a Farmington Republican who sits on the House tax committee.
Senate sounds note of caution
Things could slow down once the proposal reaches the Senate, which does not face re-election until 2016 and where Senate Majority Leader Tom Bakk feels little of the House’s urgency.
“I think it’s getting late to make the argument we need to do this soon because people are filing their returns,” said Bakk, DFL-Cook.
Bakk said that so few businesses would be affected by the new warehousing taxes that he feels little pressure to rush something through.
“We are not going to adopt anything we haven’t had hearings on,” Bakk said. “It may take us awhile.”