The Minnesota Legislature returns to work next month for a one-day special session that will deal with disaster relief — and nothing else.
Despite repeated attempts, taxes are now off the agenda after Gov. Mark Dayton and the GOP were unable to agree on which of the state’s new business sales taxes should be repealed or how they would make up for the millions of dollars in lost tax revenue.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Dayton, who had urged Republican legislators to come up with a way to offset the revenue the state would lose if it repealed all three of the new business-to-business sales taxes the Legislature passed in May.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 appropriating state aid for storm-damaged counties in southeast Minnesota. The June storms caused millions of dollars in damage to public infrastructure and prompted a federal disaster declaration for the region. But before the aid money can start flowing, legislators have to sign off on a disaster relief appropriations bill.
Dayton had earlier offered to expand the special session agenda to include repeal of one tax provision — a tax on farm equipment repair he said was erroneously inserted into the $2.1 billion package of tax increases. The state, he said, could cover the $28 million in lost tax revenue out of the general fund.
But if lawmakers wanted to repeal additional taxes, Dayton said, they’d have to come up with a way to pay for it. Talks broke down as the GOP caucus pushed for broader tax repeals. Both sides eventually agreed to drop the tax issue for now and focus solely on disaster aid.
Republican leaders accused Dayton and the DFL 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.” Hann did not offer specifics on which items he would trim from the state budget to offset the lost revenue.
House Minority Leader Kurt Daudt, R-Crown, 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 use the general fund to make up for the lost $28 million. Daudt said any surpluses should go to repay funds the Legislature borrowed from Minnesota schools.
“We couldn’t in good conscience let them take money from schoolkids to pay off a mistake they made at the end of session,” Daudt said.
The state is already required by law to use any projected surplus to restore budget reserves and pay down the accounting shift that allowed the state to take money from public school districts.
Legislators 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 legislators to St. Paul at 10 a.m. Sept. 9.