Tax-cut bill goes to governor

The Minnesota Senate passed a package of business tax cuts and sent it to Gov. Mark Dayton on Thursday with the strong indication that his signature on it will be needed if he wants their cooperation on a Vikings stadium.

The Senate followed the lead of the House earlier this week in passing the GOP tax bill, one of the Republicans' top priorities in the waning days of the legislative session, by a 41-25 vote.

That bill was one of three big measures awaiting action and the only one voted on Thursday; the House and Senate then adjourned until Monday. The two measures awaiting action are the capital-projects and Vikings stadium bills.

The DFL governor has made it clear he does not like the tax-cut bill, calling it "fundamentally unfair." His spokeswoman said Thursday that he is not willing to trade his signature for the stadium, which he believes the Legislature should consider on its own merits.

If passed into law, the tax bill would freeze the statewide property tax for businesses and cabins, speed up a sales-tax exemption for businesses purchasing capital equipment, expand tax credits for investors in new ventures and improve a sales-tax exemption for data centers and computer equipment. Property-tax relief for homeowners who face large increases and income tax credits for businesses that hire veterans also are included.

The capital-projects bill, which still awaits action, contains $496 million in bricks-and-mortar projects such as flood mitigation and bridge repairs, but not local projects members had tried to insert. For instance, the House version has no money for convention centers, the Southwest rail corridor, a face-lift for Nicollet Mall or a new ballpark for the St. Paul Saints. It scaled back the House's original plan to borrow more than $200 million to repair the crumbling State Capitol; the new figure is $44 million.

The capital-projects bill also includes almost $200 million for projects at state colleges and universities, $30 million for flood control and $83 million for economic projects and grants.

Both houses had hoped to bring it to a vote late Thursday, but did not. House Speaker Kurt Zellers, R-Maple Grove, said the governor's office raised concerns about the fact that the Minnesota State Colleges and Universities system was getting considerably more money than the University of Minnesota system. Rather than risk a veto, Zellers said, he decided to take the weekend to work out new numbers.

Following the tax-bill vote, Sen. Julianne Ortman, R-Chanhassen, a stadium foe who leads the Senate Taxes Committee, said Dayton "will be well-advised to recognize what our priorities are."

"The business property-tax relief and tax relief for all Minnesotans has to come first, before we provide tax relief for one business venture," she said. "I think that's really important. It sets the stage for success on the Vikings stadium vote."

Dayton's spokeswoman, Katharine Tinucci, said he believes the bill is "terrible" because it compromises the state's fiscal security in the coming biennium. She said he rejects any connection with the stadium. "If they're looking for a way to bury the stadium, they need to find a more direct way to do it," she said.

In debate on the Senate floor, supporters played on the theme of the session -- that this is a bill that will directly lead to job creation. Opponents of the bill questioned those claims and argued that carving out tax cuts when the state owes billions to its schools is bad fiscal management.

For businesses struggling during a tough economy, Ortman said, "help will be on the way in a matter of weeks." She said the upfront capital-equipment exemption will create more buying and manufacturing, and a "surge" in economic activity. She claimed the bill "represents tens of thousands of new jobs."

Senate Minority Leader Tom Bakk, DFL-Cook, questioned how a slight dip in a company's property taxes could boost employment. Most affected businesses are retail operations, he said, and the change wouldn't cause more demand for products or services.

"You think Wal-Mart's going to hire anybody if we cut their property taxes?" Bakk said. "They will benefit on the corporate bottom line in Bentonville, Arkansas -- they're not going to hire more people."

House Taxes Committee Chairman Rep. Greg Davids, R-Preston, said extensions of tax-increment districts, such as one near the Mall of America, will allow local projects to move forward, potentially creating more jobs than the stadium and the bonding bill together.

Staff writer Jennifer Brooks contributed to this report. Jim Ragsdale • 651-925-5042