Legislature forms new tax refund bill

by Amy Olson

Professors are more likely than students to benefit from two tax-cut bills before the state Legislature.
A joint committee of senators and representatives began hashing out the differences between the two versions of the omnibus tax relief bill Wednesday. Although the two bills have been touted as providing a tax break for everyone, people in the lower income levels will get smaller returns on their taxes than those in the state’s higher income brackets.
And some political watchdogs are concerned that might ultimately raise tuition rates at the University.
The major dilemma facing legislators is how much to return to taxpayers and who will get what.
The House bill contains $3.3 billion in permanent tax cuts and temporary tax relief, while the Senate version totals $2.5 billion. The House bill contains $1.7 billion state income tax cuts, whereas the Senate bill provides only $951 million in income tax cuts.
The House bill would lower income taxes for all income brackets by 0.5 to 1 percent. However, the Senate plan leaves the top bracket intact, while lowering the percentage rate for the two lowest levels by 0.5 percent.
While Democrats and Republicans from both houses have called the plan the largest and most responsible tax cut in state history, others caution that the bill — especially the House version — puts too much money into tax relief at a time when the state could face a recession.
“When you have good times, if you think they’ll never end, you’re just living a fairy tale,” said Sen. Charles Berg, an independent from Chokio, Minn.
“We’re very much concerned that the total amount would not be sustainable over time,” said Wayne Cox, executive director of Minnesota Citizens for Tax Justice.
Cox said the level of cuts in the House bill could put future state spending in jeopardy in the event of a recession, adding that state economists predict a 40 percent chance of an economic downturn within the next two years. That could cause the government to raise taxes in other areas and drive up tuition rates at the University.
Although the large tax cuts are a concern, the Legislature’s yearly increases in state spending are of greater concern, said Tom Prichard, president of the Minnesota Family Council.
Prichard said while overall state spending is important, his organization has been more concerned with eliminating the marriage tax penalty. Under the current tax laws, married couples who file joint tax returns pay more than single individuals.
While both plans attempt to eliminate the penalty, Prichard said the House version is better because it doubles the single-income cut-offs within each bracket.
The committee will also have to work out differences between spending sources. The House bill uses money from the state’s $6.1 billion tobacco settlement to help pay for the cuts, while the Senate plan would put the money into endowments for health care education and smoking prevention. The two bodies have already agreed on a one-time $1.3 billion sales tax rebate plan.
Legislators do not expect to wrap up conference committee negotiations on the bill until the end of next week, hoping to minimize interruptions into regular House and Senate meetings.
“Our goal is to meet only during daylight hours,” said Sen. Doug Johnson, DFL-Tower.