Minnesota House Panel Advances $500 Million Tax Cut Bill

By Bill Salisbury, St. Paul Pioneer Press

House Democratic-Farmer-Labor leaders took a first big step Thursday toward rushing through a package of tax cuts that would save middle-class Minnesotans and businesses an estimated $500 million in this election year.

The House Tax Committee cobbled together and passed the massive bill on what sounded like a unanimous voice vote.

The measure would provide immediate income tax relief by conforming Minnesota tax law to new tax breaks in the federal tax code and also would repeal three new business-to-business sales taxes.

“We’re hurrying because the public is filing their taxes right now, and we need to get federal conformity taken care of right now,” said House Tax Committee Chair Ann Lenczewski, DFL-Bloomington, the bill’s chief sponsor. Income taxes are due April 15.

Rep. Greg Davids of Preston, the lead Republican on the committee, agreed. “I feel the need for speed. We have to get going here,” he said.

The bill now goes to the House Ways and Means Committee. House Speaker Paul Thissen, DFL-Minneapolis, said the full House could vote on it next week.

DFL Gov. Mark Dayton has endorsed the tax cuts, but the leaders of the DFL-controlled Senate haven’t signed on yet. Senate Majority Leader Tom Bakk, DFL-Cook, has said he wants to make sure the tax cuts don’t result in future state budget deficits.

Filing state income taxes would be more complicated and expensive for taxpayers if Minnesota doesn’t match the federal changes. Minnesotans would have to add back income from items excluded by the new federal tax breaks.

The bill would eliminate the so-called “marriage penalty,” saving an estimated 650,000 families Minnesota families an average of $120. Total savings: $111 million.

Other key income tax breaks include:

— Increasing the “working family credit” by $36 million, cutting taxes for more than 50,000 families by an average of $300.

— Providing deductions for college tuition and paying off student loans that would save students and parents an estimated $26.4 million.

— For homeowners who went through a mortgage foreclosure or short sale, excluding indebtedness income for a $7.2 million saving.

— Offering a deduction on mortgage insurance premiums, saving new homeowners $3.9 million.

— Granting low-income families with dependents $1.8 million in tax savings. An estimated 25,000 families with incomes below $38,570 would see an average $65 tax cut.

The House bill also would scrap three business-to-business taxes passed last year.

It would stop a sales tax on warehousing services from taking effect April 1, as currently scheduled. And it would repeal sales taxes on telecommunications equipment and commercial equipment repairs, including farm equipment, and offer refunds to taxpayers who paid those two taxes since they took effect July 1.

Getting rid of those three taxes is the top priority of the Minnesota business community and Republican legislators.