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House GOP budget plan puts Legislature at odds with Dayton

April 12, 2018

ST. PAUL, Minn. (AP) — Democratic Gov. Mark Dayton and Republican lawmakers could be headed for a messy conclusion to the legislative session as the House GOP majority on Thursday laid out drastically different framework for how to spend a $329 million budget surplus while retooling Minnesota taxes to match recently passed federal tax breaks.

While the tax cuts passed by Congress last year mean more money for many earners and businesses, Minnesota stands to pull in nearly $500 million a year in additional revenues. Dayton has proposed redirecting that money largely to individuals and families. That would leave some businesses with a higher tax burden while also repealing GOP-backed tax cuts on tobacco products, wealthy estate owners and businesses that passed the Legislature just last year.

But Republicans in the House Thursday released a rough budget roadmap that calls would put an additional $107 million toward tax breaks, while calling for $7 million in unspecified cuts to state agencies. Republicans who control the Senate have also left the door open to using part of the state’s expected surplus to reduce taxes even more.

A year after the two sides spilled into an overtime session to agree on $650 million in tax cuts as part of a $46 billion budget, the differing approaches to simplifying Minnesota’s tax code set up yet another philosophical fight over taxation. And there are just six weeks remaining in the legislative session to sort it out.

The passage of last year’s budget means there are few must-dos for the Legislature this year. But lawmakers are under pressure to sync state taxes with the federal government in order to avoid incidental tax increases on business and large families. Failure to do so could mean logistical nightmares for Minnesotans when filing taxes next year.

Republicans bashed Dayton’s proposal when he unveiled it last month, saying it would burden many small businesses with tax increases. They’ll start putting together the details of what specific tax cuts and credits may be on the table in their own package in the coming weeks.

House Taxes Committee Chairman Rep. Greg Davids said much of the $107 million for tax breaks would help ensure Minnesota taxpayers aren’t hit with increases when the state matches its tax code with the federal government. What little extra money is left, he said, could go toward smaller tax relief measures like local sales tax exemption.

“My goal is to hold as many Minnesotans harmless as we possibly can,” the Preston Republican said, adding that some business still may face some tax increases next year.

The House GOP’s plan also calls for using $15 million to expand broadband internet in rural Minnesota, put an extra $101 million toward road and bridge repairs, and devote roughly $30 million for school safety improvements and mental health initiatives in the wake of February’s mass shooting at a Florida high school.

But Republicans are also targeting the state budget passed last year to drum up more money for tax cuts and other priorities. Their budget document simply lists $7 million in savings from undetermined “efficiencies.”

Dayton warned Republicans not to go there in a letter to legislative leaders earlier this week, writing: “I will not consider cuts to the operating budgets of state agencies, which we negotiated and enacted a year ago.”

Meanwhile, the governor has revived his push to repeal certain tax breaks he signed into law just last year. Those include measures that froze cigarette taxes, slashed tax rates on expensive cigars and cut taxes for business properties and estates.

“As far as I’m concerned, the governor’s proposals on that are as dead as a doornail,” said GOP Rep. Jim Knoblach, who chairs the Ways and Means committee.

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