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As DFL legislators head toward a showdown over a proposed tax-break package, hopes are quickly fading that they will meet DFL Gov. Mark Dayton’s deadline.
Dayton wants to sign a bill by Wednesday, which he says is the latest the Legislature can pass the measure and still be able to provide $57 million in retroactive tax relief for low-income and middle-class Minnesotans.
“As the time goes on, the consequences become more severe,” the governor said.
But Senate leaders plan to continue plowing through the tax package and adding changes of their own by the end of next week, thus missing Dayton’s deadline.
“Our priority is to get the work done as soon as we can,” said Deputy Senate Majority Leader Jeff Hayden, DFL-Minneapolis.
The proposal then would return to the DFL-controlled House, where members could simply approve the changes or send them to a conference committee for more deliberation.
DFLers who control the Senate say they do not feel the same urgency as Dayton and House members because so many Minnesotans have already filed their income taxes. Already, 1.2 million Minnesotans have filed their 2013 individual income tax returns, about 44 percent of all filers.
Minnesota Department of Revenue officials say time is running out to be able to make changes before most Minnesotans file.
The governor is preparing to amplify his public pleas next week, increasing pressure to coax a speedy resolution.
Dayton said if legislators drag it out too long, thousands of Minnesota taxpayers would have to file amended returns, which could be cumbersome and expensive for consumers and the state.
“The last thing I want to see,” Dayton said, is confusion and inefficiencies “in implementing tax refunds that they are entitled to.”
What tax breaks would do
With the state facing a $1.2 billion projected budget surplus, Dayton and many legislators want to return at least $550 million through a mix of tax breaks. They want to make some of the tax relief retroactive for 2013, such as tax breaks for working families, college loan debt and consumers who lost their homes to foreclosure.
A family of four making $30,000 a year could lose $540 from the working-family credit if the changes do not become law. A Minnesotan who lost a home to foreclosure last year could face thousands of dollars in extra income-tax liability.
The Senate has given a far icier reception to a proposal to repeal three new business-sales taxes on warehousing services and telecommunications equipment and repair.
The Senate pushed for the new taxes last year as the last bit of money to patch up a small budget deficit and to pay for other tax breaks and new education spending.
Dayton and DFL House leaders — both facing what is expected to be a tough re-election fight this fall — strongly support doing away with the new sales taxes, which have drawn biting criticism from the business community.
Senate Taxes Committee Chairman Rod Skoe, DFL-Clearbrook, would not say whether repealing the business taxes will be part of the final tax proposal next week. Tax reductions are booked as spending in state budgets, so any relief comes at the expense of other priorities.
Skoe said he is more focused on using a good chunk of the projected surplus to build up the state’s budget reserves, which are far below what some credit-rating agencies see as ideal.
Skoe said that when he met with residents in his district, “their priority is the rainy-day fund.”
Pressure to repeal
Skoe and other DFL leaders face mounting pressure from business leaders and within their own party to repeal the business taxes, particularly the new warehousing tax that kicks in April 1.
“Living in a border community, the warehousing tax is especially concerning for the Port of Duluth,” said Sen. Roger Reinert, DFL-Duluth. “It would put the port at a distinct competitive disadvantage with our warehousing facilities in Wisconsin.”
Republicans are eager to hammer on Democrats if they prove unable to repeal the business sales taxes.
“I think that is a big fail if we don’t get that done,” said Senate Minority Leader David Hann, R-Eden Prairie.