State Senate Republicans want to increase tax relief for Minnesotans this year by proposing more than $360 million in permanent sales tax relief.

“Sales taxes affect everybody,” said Senate Minority Leader David Hann, R-Eden Prairie. Sales tax relief “is abundantly fair.”

Senate Republicans want to lower the state sales tax rate to 6.375 percent, from 6.875 percent.

The proposal comes as DFL leaders who control the Senate finalized more than $500 million in tax relief for consumers and businesses. The measure is expected to get a final vote Thursday.

Legislators are wrestling with a $1.2 billion projected budget surplus, which comes largely from the state’s strong economic performance.

Republicans have argued that Democrats raised too many new taxes last year. They have proposed returning nearly all of it to taxpayers, which could dramatically wipe out projected surpluses in the following years and potentially send the state into deficit again.

Senate Democrats are taking a more cautious approach and are trying to spend the money in ways that doesn’t blow a monster hole in the budget it future years. The Senate strongly supports using some of the surplus to bolster the state’s reserves by another $150 million, bringing the state’s rainy-day fund to around $750 million.

Senate Taxes Committee Chairman Rod Skoe said he does not want a repeat of the last decade, where the state was locked in cycle of deficits and emergency budget cutting that damaged the state's credit rating.

“We don’t want to go through that again,” said Skoe, DFL-Clearbrook. “A little bit of caution is in order.”

Republicans oppose building up the reserves, saying the tax money should be in the economy, not sitting in the state’s bank account.

“We are better off letting people keep their money in their pockets,” Hann said.