Fate of a tax cut uncertain next year

This past legislative session, House Republican and Senate DFL majorities were not able to come to an agreement on taxes. The two sides were more than $1 billion apart. Senate Majority Leader Tom Bakk, DFL-Cook, wanted a transportation bill with a dedicated funding stream like a gas tax increase, and without it, he refused to budge on a tax bill.

As a result, the Legislature and Gov. Mark Dayton left more than $800 million unspent. And as the Minnesota economy continues to hum along, the surplus continues to grow, adding $136 million in September alone.

With 2016 being an election year, Kadoun's optimism might seem warranted. Her tax panel was a window into the Minnesota Chamber's wish list. One speaker showed how the state's taxes on commercial and industrial property are higher than other states. Another claimed unfair taxes on his business that is set up as a special entity called an S corporation. A tax lawyer said Minnesota's estate tax could lead to the sale of long-standing family businesses.

House Republicans included business and estate tax reductions in their stalled tax bill this past session. The Democrats had similar, but smaller, reductions.

The chamber's optimism on a tax cut, especially one directed at business, should probably be tempered, however.

Election year politics will come into play. Lawmakers may look to direct relief toward families and homeowners rather than businesses. The House DFL minority, which is desperate to regain its majority status, hit Republicans hard on the GOP tax bill, saying it was directed at wealthy heirs and big, often out-of-state corporations.

Senate Taxes Committee Chairman Rod Skoe, DFL-Clearbrook, said the money is certainly available and he hopes to pass a tax bill next year, but he also cautioned about all the reasons a menu of tax cuts might not be in the offing.

Suddenly, there are new issues to attend to, which could require at least a modest tax bill. The Minnesota United soccer franchise announced a new stadium project in St. Paul, and the team wants property tax help from the Legislature to build it.

Although the surplus continues to grow, Skoe points out that one-third of the extra money will automatically go into state budget reserves and out of the hands of state lawmakers.

Skoe also indicated that Senate Democrats are still looking for transportation money before they relent on tax cuts: "We thought it was a reasonable compromise to give a dollar tax cut for every dollar for transportation," he said.