"We've been through this before," Gov. Mark Dayton said Wednesday about the House tax bill, which proposes a $2 billion tax cut over the next two years and includes features that would keep cutting business property taxes for years to come. The DFL governor likened the GOP-designed bill to deep state and local tax cuts in 1999-2001 and recalled their aftermath -- a dozen years of state deficits.
Moments later, House DFL minority leader Paul Thissen continued the analogy, referring to the bill's $1,000 per person income tax exemption as "essentially a Jesse Check." The exemption would deliver Minnesota income taxpayers with average incomes about $70 per person in each of the next two years, then disappear.
Jesse Checks, named for then-Gov. Jesse Ventura, were a one-time sales tax rebate in 2000 that gave every taxpayer an average of $600. In Capitol lore, they're cited as an example of political pandering (the checks were issued shortly before the 2000 election) with little discernable positive result.
That legend tells it true. But permit one good word for Jesse Checks: They were a better deal for more Minnesotans than this year's exemption increase. That's because they were crafted as a sales tax rebate, not a change in state income tax liability.
The 2000 sales tax rebate reached Minnesotans who owed no state income tax; an exemption increase will not. And no portion of the sales tax rebate wound up in federal coffers. State income taxes are deductible for federal tax purposes. Cut one's state income tax, and the federal taxes one owes increase. In contrast, a state sales tax reduction does not alter federal tax liability.
If the personal exemption idea had been thoroughly vetted in House committees, the advantages of converting it into a sales tax rebate might have been weighed. Instead, that provision in the tax bill was seen for the first time on the day the omnibus tax bill was unveiled. I'd call that insufficient scrutiny for a proposal to take $265 million out of state coffers next year.
