The Minnesota Legislature returns to work next month for a one-day special session that will deal with disaster relief, and nothing else.
Taxes are off the agenda after Dayton and the GOP were unable to agree on which of the state’s new business sales taxes should be repealed, or how they would make up for the millions of dollars in lost tax revenue.
"I wish we had $314 million available to commit to eliminating these three taxes, but we don’t," said Dayton, who had urged Republican lawmakers to come up with a way to offset the revenue the state would lose if it repealed all three of the new business-to-business sales taxes the Legislature passed in May. “So we either have to generate more revenue or we have to cut spending.”
The two sides met Wednesday and agreed to limit the special session agenda to securing almost $5 million in disaster relief for Minnesota counties hit hard by June storms that caused millions of dollars in infrastructure damage and prompted a federal disaster declaration for southeast Minnesota.
Dayton had offered to expand the special session agenda to include repeal of one tax provision -- a tax on farm equipment repair he said was inserted into the $2.1 billion package of tax increases by mistake. The state, he said, could cover the $28 million in lost tax revenue out of the general fund.
But if lawmakers wanted to repeal more taxes, Dayton said, they’d have to come up with way to pay for it. Talks broke down as the GOP caucus pushed for broader tax repeals and both sides eventually agreed to drop the tax issue for now and focus solely on disaster aid.
Republican leaders accused Dayton and the Democrats of having little real interest in repealing the taxes.
“These taxes are excessively burdensome and everyone agrees that they’re burdensome,” said Senate Minority Leader David Hann, R-Eden Prairie. “But it really, in my opinion, came down to a reluctance on the part of the majority and the governor to say, ‘We’re not sure we want to do that, maybe there won’t be enough revenue.’ What they’re really saying is that the budget itself is not subject to any additional cutting.”
House Minority Leader Kurt Daudt said repeal of the farm equipment repair tax was “absolutely a priority” for his caucus, but he was leery of the governor’s plan to pay for it out of the general fund. If the state does end up with a surplus, he said, its first priority should be to repay the funds the Legislature borrowed from Minnesota schools.
“We couldn’t in good conscience let them take money from school kids to pay off a mistake they made at the end of session,” Daudt said.
Lawmakers imposed the three new business taxes— on business equipment repairs, warehousing and telecommunications equipment -- to cover the cost of cutting sales taxes to cities and counties, with the hope they would pass the savings along to residents in the form of lower property taxes.
“It was a matter of priorities,” Dayton said. If lawmakers decide to repeal the taxes during the regular session next year, he added, “$314 million, where will we cut that? Will we eliminate all-day kindergarten? Eliminate early childhood scholarships? It’s going to have to come from somewhere and it’s going to affect real people throughout Minnesota. We decided that keeping our commitment to the people of Minnesota was more important than these three taxes.”
Dayton will recall lawmakers to St. Paul at 10 a.m. Sept. 9.