GOP plans tax breaks as a boost for Minnesota jobs

Minnesota Republican legislators are proposing to give families and businesses a variety of tax breaks that they say will serve as the backbone of the GOP's effort to create jobs and energize the state's economy.Senate Republicans on Wednesday unveiled a comprehensive jobs bill that seeks to suspend the income-tax marriage penalty for the year, cut taxes for "angel" investors and phase out the statewide business property tax. Meanwhile the House passed, on a 72-62 party-line vote, a GOP-led tax bill that seeks millions of dollars in business tax breaks.

"If married couples have more income, they are going to invest it," said Senate Taxes Committee Chairwoman Julianne Ortman, R-Chanhassen. "If you've got business with more of their income that they are not paying in state general levy taxes, then they are going to invest it."

While Republicans, who control both legislative houses, have said the bills fulfill a pledge to focus on stimulating the economy, DFLers say the GOP would hurt middle-class Minnesotans in order to aid business.

"They are standing up for big corporations and sticking it to the middle class," said House Minority Leader Paul Thissen, DFL-Minneapolis. "We don't think that is the priority of Minnesotans."

The proposals could drain tens of millions of dollars from newly replenished budget reserves. The Senate Republican proposal leaves the state about $102.5 million short by the end of the 2013 fiscal year, which would force commissioners from Gov. Mark Dayton's administration to either make spending reductions or tap the state's budget reserves.

Ortman said the business tax breaks would be a huge benefit for job creators in exchange for comparatively minimal suffering by the state. After shifting some money around, the state would face a $99 million deficit, a tiny fraction of the state's two-year budget.

"It's about reinvesting in growth and economic activity for our businesses and tax relief for our families," Ortman said. "These are Minnesotan goals, so I would hope the governor would step up and help us identify the savings we need to pay for these investments."

Dayton's commissioners, fresh from cutting hundreds of millions of dollars to end the state government shutdown last summer, have told legislators that they've already cut to the bone. The state's financial fortunes have improved, commissioners said, allowing it to replenish the budget reserves and begin the long road to repaying more than $2 billion owed to public schools.

Sen. Rod Skoe, DFL-Clearbrook, said Republicans cannot expect to foist budget problems of their creation on the governor or turn to budget reserves.

"It's the Tax Committee, not the Budget Reserve Transfer Committee," said Skoe, who serves on the Taxes Committee with Ortman. "To say the governor is going to find $100 million in savings without putting any ideas on paper -- it is not the way we do business. If you are going to provide tax relief in one area, you have to find some revenue somewhere else to pay for it."

The House and Senate Republicans still have vast differences between their tax and jobs bills, which will need to be resolved in a conference committee.

Many House Republicans don't like the Senate's proposal to raise taxes on smokers by $2.7 million a year.

Some Senate Republicans will not accept the House proposal to cut about $70 million from the state's renters credit, which goes to low- and middle-income renters.

"We are not supporting any reduction in renters credit," Ortman said.

Even if Republicans cut some of the more controversial provisions, it's far from certain Dayton would sign it. The DFL governor has harshly criticized other Republican proposals to dip into budget reserves, saying it was not sound financial management, even to pay back public schools.

DFLers called the tax and jobs bills "veto bait," saying Republicans are trying to score political points. The DFL members expect Dayton to strike down the measures.

"I can only hope that Gov. Dayton will be there with his veto pen to save you from yourselves," said Rep. John Lesch, DFL-St. Paul.

Rep. Greg Davids, R-Preston, chairman of the House Taxes Committee, said after the vote he believes there are a lot of good proposals in the House and Senate bills that he hopes Dayton could accept.

Davids disagreed with DFL claims that the tax breaks provide no guarantees that businesses would use the new money to hire workers. He said Dayton's commissioners told his committee that some of the tax breaks for research and development will almost certainly add jobs. The tax breaks for the Mall of America, he said, very likely will result in more hiring.

"There are a lot of good things I think we can move ahead on," Davids said.

Ortman said she and other GOP legislators regularly join Dayton for breakfast and have talked about many of the proposals. She remains hopeful they can work out an agreement.

Baird Helgeson • 651-222-1288