The Minnesota Legislature opened the new year’s session in January with several new tax-rebate proposals in the range of $450 million to $500 million. The proposals follow last year’s spending of about $1.3 billion in property-tax rebates. Despite the large payoff, more than 400,000 renters and homeowners were missed, including 150,000 dependents who were at least 18 years old at the time. To ensure all taxpayers share in the state’s burgeoning prosperity, legislators should include in this year’s proposed rebate all who were unfairly ignored last year.
The Senate Tax Committee last week approved a proposal that would include $114.5 million in retroactive rebates for senior citizens, young adults and people with disabilities who were claimed as dependents and considered ineligible last year. The neglected groups would also be included in the $338.5 million that would be used for the new rebate. On Feb. 5, Gov. Ventura proposed a $473 million rebate that would include 245,000 senior citizens on Social Security and people with disabilities who receive their income from the government. Last year’s tax rebate missed both groups. Although he said he is open to discussion about possible retroactive rebates, there is no mention of including dependents in his sales-tax rebate proposal.
However, Ventura and other lawmakers are showing little consideration for dependents — particularly college students — who have contributed greatly to Minnesota’s bustling economy. Students also pay their fair share of Minnesota’s taxes, including income, sales and rental taxes. Many actually receive little help from their parents and work 30-hour weeks, while slowly descending into the depths of debt from student loans. Despite their contributions to Minnesota tax coffers, dependents receive little compensation from the state. Passing a retroactive rebate and including young adults in this year’s sales-tax rebate would allow students to benefit from the state’s budget surplus.
But administrators say the inclusion of dependents would jeopardize the rebates’ exemptions from federal taxes. Although the Ventura rebate proposal, for example, would give back 22 percent of the total sales tax received in 1999, if dependents were included, some would end up with larger rebates than they actually paid. Revenue Commissioner Matt Smith said including dependents in the rebates could harm the state’s argument that rebate checks should be free of federal taxes. Wisconsin, however, passed a $700 million tax-rebate bill in November that includes dependents among its recipients. Legislators do not anticipate any federal tax on their rebate program despite the inclusion of dependents, who will only receive a check if they earned $5,000 or more in 1998. Minnesota should follow Wisconsin’s lead and give back to working dependents.
While the governor’s proposal would let 245,000 people who were left out last year share in this biennium’s estimated $1.6 million budget surplus, the plan would continue to ignore 150,000 young workers. The Legislature should pass the proposal the Senate Tax Committee approved and reward a demographic often disregarded.