Tag Archives: myron frans

Update: Smokers, corporations to provide stadium funding backup

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Frans

By Danielle Killey and Don Davis

Smokers will provide the backstop to Viking stadium construction funding, the governor and legislative leaders announced Thursday night.

If that is not enough, eliminating corporate tax loopholes will be a second backup to electronic pulltabs and bingo, which have failed to generate as much state revenue as expected.

Confirming a proposal Revenue Commissioner Myron Frans unveiled earlier in the day on behalf of the governor, the Democratic leaders said they agree on the plan. Gov. Mark Dayton, House Speaker Paul Thissen, DFL-Minneapolis, and Senate Majority Leader Tom Bakk, DFL-Cook, told reporters Thursday night that the proposal will be part of a tax bill expected to pass before Monday’s legislative adjournment deadline.

A cigarette tax increase and closing what some see as a corporate tax loophole would be backup sources if other revenue sources continue to fall short, though supporters say they hope money from electronic pulltabs and bingo will be enough to fund stadium construction.

Frans said the tax increases already were being discussed, but the money now would be earmarked to fund the Vikings stadium if needed.

About $24.5 million estimated to come from a cigarette tax increase would go to plug a possible deficit in stadium funding for the next two years.

The plan would raise the cigarette tax from $1.23 per pack to $2.52. That is the same as Wisconsin’s rate, the highest of Minnesota’s neighbors.

Republicans, who were not involved in drawing up the backup stadium finance plan, complained that the Dayton proposal would take money away from schools and other state needs.

Sen. Dave Thompson, R-Lakeville, said Dayton promised not to use general tax dollars to fund stadium construction. The funds from the cigarette tax and closing tax loopholes would go to the state’s General Fund, where Thompson said schools and other state programs get money.

“Why are we talking about the stadium now?” said Senate Minority Leader David Hann, R-Eden Prairie, with the end of this year’s session coming Monday.

When asked about the GOP allegations, an angry Dayton said the taxes are earmarked for a stadium and do not take money away from other needs.

“They want to screw up the project,” Dayton said of Republicans.

The stadium, replacing the downtown Minneapolis Metrodome, already is producing jobs, the governor said. Had the new stadium not been approved, a $400 million project with two office towers and other development would have gone to Des Moines, Iowa, Dayton said.

He called Republican opposition “political grandstanding.”

The law enacted last year to approve a nearly $1 billion stadium pinned the state’s $348 million contribution on electronic pulltab and bingo tax revenues.

“We’ve been disappointed with the rollout and how long it’s taken,” Frans said, but “we hope the original source will continue to grow.”

Closing the corporate tax loopholes would bring in about $26 million in the first year and $20 million annually after that, Frans said. Businesses now can avoid some state taxes by attributing sales to affiliates in other states, he said.

“It may never be used,” Frans emphasized of the new taxes. “The primary source still is charitable gambling.”

Smokers would help fund Vikings stadium construction

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Stadium drawing

By Don Davis

Minnesota legislative tax negotiators tentatively approved a plan today to use cigarette tax increase funds and close corporate tax loopholes to provide backup Vikings stadium construction funds.

Gov. Mark Dayton, who opposed cigarette tax increases when he campaigned for office, offered the plan to 10 legislative tax negotiators this morning.

Revenue Commissioner Myron Frans said Dayton does not support taxing sports memorabilia and stadium seats as part of the solution.

Also this morning, a key tax negotiator said she would be comfortable waiting until next year to decide how to help Rochester prepare for a $3 billion Mayo Clinic expansion.

The stadium funding question arose when the prime source of state revenue to repay construction loans fell far short of predictions. The law enacted last year to approve a downtown Minneapolis stadium depended on electronic pull tab and bingo tax revenues.

Dayton’s plan, to be further discussed by tax negotiators as the 2013 legislative session winds down by Monday, calls for increasing cigarette taxes to $2.52 per pack, up from the current $1.23.

The new tax would be the same as Wisconsin, which has the highest rate of any state around Minnesota.

A one-time stock fee on cigarettes to get to the new tax amount would go to fill in stadium funding deficits.

Other than the cigarette tax funds, the Dayton plan would close what some consider tax loopholes on corporations to bring in more revenue in future years if needed.

Pulltab and bingo tax receipts still would be the primary funding system, with the cigarette tax being used to back that up.

Also today, hopes dimmed for Mayo Clinic to get aid it has sought in preparing for a major Rochester expansion.

House Tax Chairwoman Ann Lenczewski, DFL-Bloomington, said that “we have paid far too much time” on the Mayo plan this year. “I’m willing to wait until next year.”

Senate Tax Chairman Rod Skoe, DFL-Clearbrook, said he has his staff working on “more important issues” than the Mayo plan.

Mayo wants millions of dollars to help Rochester improve infrastructure as the world-famous clinic would attract more patients.

Bigger deficit? Tax impact? Questions abound about Minnesota proposal

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By Don Davis and Danielle Killey

Federal tax law changes could lead to a deeper Minnesota budget deficit, the state Senate leader says, one of several uncertainties about the state budget.

The possibility of a growing state deficit and ambiguity about what is happening in Washington raise questions about whether Gov. Mark Dayton’s $38 billion two-year budget proposal will need major alterations. Even many of Dayton’s fellow Democrats wonder about the tax portion of the plan a month after it was introduced.

In November, financial officials reported the state faced a $1.1 billion deficit, a figure Dayton used in building his budget. A financial report earlier this month appeared better, with the state collecting $140 million more than expected in January.

However, Senate Majority Leader Tom Bakk, DFL-Cook, said that tax bump actually may be bad news.

The former Senate Taxes Committee chairman said the increase was “driven by the federal tax policy changes. I believe there are a lot of people deciding to cash in some investments and dividends at the lower tax rate than the tax rate you see now.”

To deal with the so-called “fiscal cliff,” Congress and the president allowed some taxes to rise, which prompted what Bakk said were attempts to sell before taxes went up.

“I am more concerned now about the deficit growing than I was a few weeks ago,” Bakk added.

On top of the deficit and congressional questions, Bakk and House Speaker Paul Thissen, DFL-Minneapolis, Friday said they need to know more about Dayton’s plan to put the sales tax on more items to see if it could be “problematic.”

Senate Minority Leader David Hann, R-Eden Prairie, was blunt about the Dayton plan, calling it “dead on arrival” because, to him, it appears no legislator from either party supports it.

Dayton expects to submit a revised budget request next month after an updated state budget forecast is released on Feb. 28. Included in the forecast will be information about how ongoing federal budget talks could affect the state.

Bakk said he submitted a request to the state Revenue Department about specifically what would be taxed under the Dayton plan. He has not heard back.

Lawmakers, business leaders and others have wondered about Dayton budget specifics, especially changes to the sales tax. Dayton’s proposal would lower the sales tax rate to 5.5 percent from 6.875 percent, but would tax more items, including services and pieces of clothing that cost $100 or more.

“What we’re trying to do by lowering the rate and broadening the base is trying to inject some stability in our revenue stream,” Revenue Commissioner Myron Frans told reporters Friday.

Overall, people spend more money on services than goods, he said.

The bulk of about $2.1 billion in new net revenue would come from a tax on services businesses provide to other businesses, such as legal, advertising and accounting fees.

“These are industries and services that have never been taxed before,” Frans said.

Those expenses probably would get passed on to consumers, business leaders have said.

Some details have been slow to come out since the plan’s initial release. Dayton spokesman Bob Hume said writing the legislation for “such complicated tax reform” is complex and takes time.

“As the Legislature goes forward, we’ll have more questions,” Frans said.

On the budget’s spending side, Bakk said that he has received a lot of requests to increase funding in specific areas over what Dayton recommended in his two-year, $38 billion proposal.

“I have spent a lot of time managing expectations,” the senator said.

Bakk said he tells groups wanting more money for their specific programs that they cannot get more spending but not pay higher taxes. “You have to be willing to pay for these things.”

Legislative notebook: GOP lays out complaints about Dayton tax plan

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Dayton, farmers

By Don Davis

Republicans are ramping up their complaints about Democratic Gov. Mark Dayton’s tax plan.

During legislative meetings Tuesday, they especially questioned the Dayton proposal to send a $500 property tax refund to most homeowners.

“We can guarantee people a tax increase, but can’t guarantee them tax relief,” Sen. Dave Thompson, R-Lakeville, told Revenue Commissioner Myron Frans.

Dayton’s plan would raise taxes on the richest 2 percent of Minnesotans and add the sales tax to services and some goods now not taxed, while lowering the overall sales tax rate.

“We are raising taxes at the state level in a big way…” Thompson said. “The tradeoff is the $500 check going back to property owners.”

Sen. Julianne Ortman, R-Chanhassen, said the Dayton plan looks like a “re-election ploy.”

“I cannot figure out why we would take money out of the pockets of middle income and poor Minnesotans just to give it to write a check to homeowners,” she said.

Frans said that during a tour of the state in recent months, Minnesotans told him they were most concerned about rising property taxes. The $500 tax refund was the best Dayton could do now, he added, because there is not enough money available to institute a full property tax overhaul.

Unions fight lockouts

Provisions making it less attractive for companies to lock out workers during labor disputes is high on the Minnesota AFL-CIO legislative agenda.

The labor organization announced its agenda Tuesday, including what it calls the “Employer Lockout Accountability Act.”

The proposal would require unemployment benefits be provided to workers for a lockout’s duration. The AFL-CIO plan also would add a penalty to an employer’s unemployment tax bill if it locks out employees.

Also on its agenda is increasing the state minimum wage. The wage increase would be followed by automatic increases in the future pegged to inflation.

“In November, Minnesotans elected new majorities to the Minnesota House and Senate who care about and will be strong advocates for middle class families,” Minnesota AFL-CIO President Shar Knutson said, adding that the group’s proposal would help the middle class.

Dayton, farmers meet

Gov. Mark Dayton promised a group of Farmers’ Union members Tuesday that he would do whatever he could do to help agriculture.

Several members of the DFL-leaning farm group praised Dayton for starting to reduce property taxes. Dayton’s budget proposal calls for a $500 property tax refund for most Minnesota homeowners, but he did not offer a plan to reform property taxes.

A Yellow Medicine County farmer told Dayton his farmland taxes rose from $12 to $38 an acre in the last decade.

Dayton called the property tax the most unfair of all taxes.

“If you want to get out of the hole, you have to stop digging,” a farmer told Dayton.

Obama coming Monday

The White House says President Barack Obama will visit the Twin Cities Monday, but did not say why he will be in town or provide any other specifics.

One potential topic for Obama is gun control, which he is promoting in light of recent mass shootings, including one in west Minneapolis.

While members of Congress are discussing the issue, so are Minnesota legislators. Bills on tap for state committee hearings are as varied as those to make it tougher for the mentally ill to get guns to another that would allow teachers to carry weapons.

Minnesota businesses worry about Dayton tax proposal

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By Danielle Killey

Someone has to pay.

Gov. Mark Dayton’s budget proposal would add more than $3.1 billion in new tax revenue over the next two years. Higher income taxes on the richest Minnesotans would bring in about $1.1 billion, but the rest has to come from somewhere. Businesses are worried they, and their customers, would take the hit.

Legislators, who must approve any tax change, admit they do not have all the information needed to decide if Minnesotans would benefit or be hurt by the Dayton plan. Republicans are especially vocal, questioning Dayton’s claim that the average Minnesotan will pay about the same in taxes under the proposal as now.

“How can that be?” Rep. Rod Hamilton, R-Mountain Lake, asked since total tax increases would be more than $3 billion and property tax refunds would return a third of that, leaving $2 billion that someone must pay.

Mike Hickey of the National Federation of Independent Business-Minnesota said new taxes on businesses will be passed on to customers.

“This is truly a net sales tax increase of $2.1 billion, and most of that is going to fall on the businesses,” said Beth Kadoun, tax and fiscal policy director for the Minnesota Chamber of Commerce. “It’s a huge concern for the business community.”

Much of that concern stems from a proposed new tax on services, including those that businesses provide to other businesses.

The governor’s plan also includes a lower 5.5 percent sales tax rate, down from 6.875 percent, but would expand what is taxed.

“We like the idea of lowering the overall sales tax rate,” Bruce Nustad, president of the Minnesota Retailers Association, said. “The tradeoffs, though, are a little difficult for us.”

Revenue Commissioner Myron Frans said the taxing of more services, such as haircuts, auto repairs and accounting, is meant to reflect a change in the state’s economy. In the 1960s people spent about a third of their money on services and the rest on goods. Now, that has flipped, Frans said.

He said the typical consumer would not pay more in sales tax overall because “the rate reduction is so significant.”

“I think this would be relatively neutral for the Minnesota economy,” said Jay Kiedrowski, a senior fellow at the University of Minnesota’s Humphrey School of Public Affairs.

The tax on business-to-business services offers the most risk for a negative impact, he said.

It is hard to predict what businesses would do to offset the tax changes, Frans said, but it could include lower wages, higher prices or less of a profit.

That means even though sales taxes are expected to even out for typical consumers under the plan, Minnesotans could end up paying more overall because of price increases or other charges.

Nustad said he is not sure the lower tax rate would be enough to appease businesses.

“Retailers would really have to be convinced that lowering (the rate) overall would spark spending on the part of consumers,” he said.

Kiedrowski said while businesses might charge more to cover the taxes, they cannot raise prices too high.

“It’s a competitive marketplace,” he said.

Some businesses are worried the plan would affect their competitive edge. Another piece of the governor’s proposal includes a tax on articles of clothing that cost more than $100, which has caused a stir.

Tax-free clothing has made Minnesota unique and drawn shoppers here, Nustad said.

“It’s tough to envision a tax bill where we’d embrace the clothing tax,” he said.

There are pieces businesses like in the governor’s proposal.

A plan to tax Internet purchases has been applauded by business leaders. The rule, often called the Amazon tax, would require online businesses with state ties to collect Minnesota sales tax on purchases.

That change would bring in an estimated $5 million a year for the state. Kadoun said the change also would make the system fair, putting Minnesota’s brick-and-mortar businesses back in competition with Internet-based businesses.

“We think that Minnesota passing that language really would level the playing field,” Nustad said.

A federal solution would be ideal, Nustad and Frans said, but Minnesota taking action would be a start.

Dayton also has included in his plan a drop in the corporate tax rate from 9.8 percent to 8.4 percent. He would freeze businesses’ state property taxes for two years as well and change how the rate increases in the future.

Those are good changes, Kadoun said, but they do not balance the concerns.

“Those positives are miniscule as compared to the overall tax expansion,” she said.

Questions still remain about the details of the proposal, but that has not stopped businesses from worrying.

“Part of it is trying to still sort through what all he’s taxing,” Kadoun said. “But the feedback we’re hearing is this is just terrible for Minnesota’s business climate.”

Frans said the governor is serious about hearing new or different ideas for a plan, though the budget must remain balanced.

Kadoun acknowledged this is only the first version of the budget plan and it likely will change before it is finalized.

“Sometimes it’s easy to say you don’t like the whole thing because you don’t like parts of it,” Nustad said. “We’re going to try to be a constructive part of the conversation.”

Dayton plan includes several tax changes

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By Danielle Killey

Business tax changes have grabbed much of the attention after Gov. Mark Dayton’s budget proposal was released Tuesday, but a property tax rebate and new taxes likely would have an impact on Minnesotans, too.

The governor proposed a $500 property tax rebate for most Minnesota homeowners in what he said is an effort to offset the tax’s escalating cost.

“When I traveled around the state the No. 1 thing I heard is that property taxes are too high,” Revenue Commissioner Myron Frans said, referencing his more than 160 local meetings throughout Minnesota before the legislative session began. “We were looking for something that was immediate and direct.”

The $500 credit for homeowners, combined with a two-year freeze on businesses’ state property taxes, would be a way to do that, he said.

The renter’s refund program would not change.

Frans said property tax reform, not just relief, is a goal for the future.

The governor’s plan would create a new income tax bracket for couples making more than $250,000 in taxable income. The fourth-tier rate would be 9.85 percent. The highest rate currently is 7.85 percent.

Minnesota’s snowbirds would pay a pro-rated income tax under Dayton’s plan as well.

Cigarettes would be taxed an extra 94 cents per pack, bringing the total to $2.52. Increased cigarette and tobacco taxes would bring in about $370 million in new revenue for the state in the next two years.

Publications such as newspapers and magazines would be taxed, which drew strong protests when the governor spoke to the Minnesota Newspaper Association. The governor also proposed a quarter-cent sales tax increase in the seven-county Twin Cities area to fund transit.

The governor’s goal was to even out state revenues from property, income and sales taxes to make the revenue stream fairer and more stable, Frans said.

Jay Kiedrowski, a senior fellow at the University of Minnesota’s Humphrey School of Public Affairs, said he thinks the approach could be successful.

“The changes the governor’s proposed will have the impact of reducing the volatility of Minnesota’s revenues,” Kiedrowski said. “I think we would see a fairer tax system than we currently have, a more balanced tax system.”

Dayton has said he is open to different ideas if people disagree with the plan. But the budget must remain balanced, he said, and Frans noted all the pieces have to work together.

“It’s important to talk about this as a package,” Frans said. “This is really designed to be intertwined.”

Dayton tax plan leaves plenty of questions unanswered

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Dayton, Frans

By Danielle Killey and Don Davis

Gov. Mark Dayton said tax changes he proposed Tuesday would not cost middle-class Minnesotans more money, but its specific impact remains unknown.

Dayton said his state budget and tax reform plan is a starting point for conversation as the Minnesota Legislature works to set a two-year budget by May 20. While he highlighted key proposals, questions remain.

Dayton’s plan, which would bring in $2 billion in new revenue over two years, would reduce the sales tax rate from 6.875 percent to 5.5 percent in a year but expand what is taxed to include most services, such as haircuts and auto repairs. Clothing items that cost more than $100 also would be taxed.

“This is the largest sales tax reduction in the history of the state,” Revenue Commissioner Myron Frans said.

The sales tax would extend to services businesses provide to other business, which are not taxed now.

Dayton said he did not know how that business tax change would affect consumers. Senate Minority Leader David Hann, R-Eden Prairie, said he thinks the cost would be passed on to them.

“We don’t know how this is going to work out yet,” Frans said. “This is a pretty massive change.”

The proposal also would up income taxes from the current 7.85 percent to 9.85 percent for couples making more than $250,000 and individuals earning more than $150,000. Suggesting increasing those taxes for the wealthiest Minnesotans came as no surprise since Dayton has pushed the proposal for years.

Under the governor’s plan, homeowners would get a property tax rebate of up to $500.

Sen. Rod Skoe, DFL-Clearbrook, said Minnesotans have been asking for property tax relief.

“That’s one of the priorities we had,” said Skoe, the Senate Taxes Committee chairman. He said the committee will look into whether the credit is the best way to provide that relief.

Commissioner Tony Sertich of the Iron Range Resources and Rehabilitation Board said the rebate is a big deal, given how much property taxes have risen in recent years.

“It is going to make a significant dent on it,” he said.

But just how much Dayton’s tax plan will help is not known, Sertich added. “We are not going to have all the answers today. Some things are going up, some things are going down. … It is going to take some time to know the total impact.”

Dayton said the lower sales tax rate should offset the expansion, and between that and the property tax rebate middle-class Minnesotans should not pay more taxes and could pay less.

“For most Minnesota families it is a wash,” he said.

Democrat Dayton said his plan is just the start of the conversation and he expects disagreement from within his own party as well as from Republicans.

He challenged those who disagree with his proposals to come up with their own.

“To those who don’t want to raise any of these taxes I say, ‘Where do you want to cut?’” Dayton said.

Democratic legislative leaders said as they delve into the budget, which they said they have not had a chance to do, they will have more to say on specific provisions. But in general they said Tuesday they were happy with the theme of the budget and tax plan.

Republicans were not as pleased, especially when it came to taxes. Hann refuted Dayton’s claims that the average Minnesotan would not pay more with the changes.

“Everybody’s going to get hit with these taxes,” he said.

Hann said he would like to see tax reform but would rather focus on lowering the rate rather than also expanding what is taxed.

Senate Majority Leader Tom Bakk, DFL-Cook, said he plans to talk with business leaders about their reactions to the proposal.

“There’s a lot in here for the business community to like,” Bakk said.

The plan includes provisions that cut the corporate income tax rate by 14 percentage and put a two-year freeze on statewide businesses property taxes.

Local governments that pay sales taxes are looking into whether the Dayton proposal will save or cost them money.

Executive Director Jim Miller of the League of Minnesota Cities said cities pay sales tax now. Dayton and Frans said their plan to lower the sales tax percentage but increase things it covers would average out to a wash, but Miller said it could hurt some cities and help others.

Taxing clothing already has proven to be controversial.

“It’s probably the right policy,” Bakk said.

But the fact that Minnesota is one of few states that doesn’t have the tax could make it a tough sell, he added. “That’s what makes it, I think, a pretty steep hill to climb.”

The tax would be applied to the full amount of clothing items that cost more than $100.

“I am sure it will give rise to a good many $99.99 deals around the state,” the governor said.

Frans said that could be the case, but “we had to pick a line somewhere.”

Dayton and officials emphasized the plan comes as a package, so it is difficult to assess specific pieces.

“Everything is connected,” Bakk said.

The details will dominate discussion at the Legislature in the coming months.

“It’s a good, bold move that the governor made,” Skoe said. “I think he’s given the Legislature a lot of opportunity … Now it’s our turn.”

Update: Dayton says average Minnesotan would not pay more taxes

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Dayton

By Don Davis

Gov Mark Dayton says taxes on average Minnesotans would not increase under the budget proposal he released at mid-day.

The plan includes a mixture of tax increases and decreases and it would spend more on education and jobs programs. It also cuts some specific programs.

Dayton’s plan would increase revenues about $2 billion, with about half going to fill the state deficit and the rest to increase spending in areas such as education and jobs programs.

The Democratic governor released his proposal to a packed Capitol-area meeting room as the beginning of discussion for the two-year budget that begins July 1.

Minnesotans would pay taxes on clothing worth more than $100, rich Minnesotans’ income tax would increase and property taxes would fall. Dayton said middle class Minnesotans will not pay more tax.

Key to the Dayton budget is increasing taxes on the top 2 percent of Minnesota earners. For instance, that would up taxes on 883 people in St. Louis County, 128 in Beltrami County, 185 in Clay County, 258 in Kandiyohi County, 94 in Nobles County, 234 in Goodhue County, 2,858 in Washington County, 185 in Douglas County, 67 in Hubbard County and 72 in Stevens County.

“The result of these changes in the income tax, sales tax and property tax would be to reduce the total state and local taxes paid by most Minnesotans,” Dayton said.

While Dayton said the budget plan is the beginning of discussion about taxing and spending, legislative Republicans and Democrats agree the two-year budget for the cycle beginning July 1 will be build off the Dayton proposal.

Dayton’s fellow Democrats control the Legislature, and while they say there will be some disagreements with what Dayton wants, they generally agree with his ideas, especially raising taxes on the rich.

His plan calls for increasing taxes for couples earning more than $250,000 a year and individuals with $150,000 incomes.

Republicans strongly disagree, saying such taxes will stymie economic development. However, they admit that Democrats can pass whatever budget they want.

Republicans only have a say in funding public works projects, which require more than a simple majority to pass.

Public works projects, funded by the state selling bonds, were not included in today’s budget plan. However, a proposal is expected later in the year.

Dayton’s proposal would the sales tax rate, but expands the tax to cover most services that now are not taxed.

However, the proposal also would add sales taxes to businesses that sell to other businesses, which could be passed on to consumers. Dayton said he did not know how that would affect Minnesotans.

“This is the largest sales tax reduction in the history of the state,” Revenue Commissioner Myron Frans said, while taxing most services in the state.

Car repair, haircuts and other services would be taxed. And businesses would pay sales tax on more items.

“For most Minnesota families, it is a wash,” Dayton said, adding that the plan does not increase the sales tax but broadens it.

“It goes against my upbringing,” Dayton said about taxing clothing. His family founded Dayton’s department stores, which began Target.

“I am sure it will give rise to a good many $99.99 deals around the state,” the governor added.

“You’ve got to tax somebody,” Dayton said.

Dayton calls for increasing cigarette and tobacco taxes while reducing corporate taxes by 14 percent. He also would reduce a statewide business property tax. Cigarette taxes would rise 94 cents a pack.

Property taxes would fall $500 per property owner via a rebate, Dayton suggested.

Frans said a Beltrami County couple with a $57,000 annual income and a $133,000 home would not pay more income taxes and they would receive a $500 property tax rebate. He said they would not pay more sales tax.

Dayton emphasizes school funding in his spending package.

He suggests $118 million in new public school funding, which averages $52 per student, and $125 million more for special education. Early learning would get $92 million more, with all-day kindergarten receiving $40 million.

The governor wants to give the state’s two higher education systems $80 million more each.

Dayton said that should allow the University of Minnesota and Minnesota State Colleges and Universities systems to stop the rapid tuition increases that have occurred in the past few years.

Commissioner Jim Schowalter of Minnesota Management and Budget said the average student graduates with $30,000 in debt, which is too much.

Another $86.5 million would go to a variety of economic development funds and $120 million more would be sent to cities and counties.

Dayton said the budget fits what Minnesota wants.

‘”We need to put our money where our beliefs are, and where we know we can get results,” he said.

Tax reform on Legislature’s docket when it convenes Tuesday

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By Danielle Killey and Don Davis

Revenue Commissioner Myron Frans traveled the state in recent months talking to Minnesotans about the state’s tax system, an extended road trip that will produce a tax reform outline in the 2013 legislative session.

The current tax system is out of date, too complex and “picks winners and losers,” Frans said.

His boss, Gov. Mark Dayton, will release his budget and tax reform ideas by Jan. 22. But even some of Dayton’s fellow Democrats wonder if a full reform is possible in 2013, a year in which he and the Legislature must adopt a two-year budget that will consume most of their time.

“I do realize that part of being an effective legislator is being patient,” said incoming Senate Taxes Chairman Rod Skoe, DFL-Clearbook. “Sometimes large changes take more time.”

Even if tax reform only can be started in 2013, committees like the one Skoe leads will be busy. They are expected to hear proposals to raise income taxes on the state’s richest 2 percent, debate whether the sales tax should collect more money and figure out how to reverse ever-increasing property taxes, especially in rural Minnesota.

Some of those goals, such as changing how the sales tax operates, could fit into a tax reform plan that starts in the coming months.

Skoe said some tax reform can happen in a budget year, but other things “may need more time to percolate.”

Dayton and Skoe said a tax reform priority, whenever it occurs, should be to make the tax system more understandable and fair.

“I don’t necessarily know if we can do the property tax reform,” Rep. Paul Marquart, DFL-Dilworth, said. “But I do think a major priority should be looking at property tax relief.”

Many lawmakers agree with Marquart that property taxes are too high, especially Democrats who spent the summer and fall campaigning on the issue.

The homestead property tax credit, which reduced taxes for homeowners by the state paying a portion of their taxes to local government entities, went away in negotiations that ended the 2011 state government shutdown. Efforts will be made to reinstate it, or at least to adopt something to help homeowners.

In 2011, lawmakers tried a new program that excluded a certain amount of properties’ values from taxes, aiming to decrease the amount owed. But the change left many local governments with the choice of raising taxes or cutting costs to make up for the difference in funding.

Eliminating the homestead credit especially hit rural areas because it was designed to help owners of low-value property, which describes many rural homes.

One issue Marquart, who will be House Education Finance Committee chairman, will tackle is property tax levy increases that have been considered in elections across the state to fund schools’ day-to-day operations.

“Now, your education is starting to depend on your ZIP code,” said Marquart, with rich communities often approving higher taxes and poor communities rejecting them.

Property taxes have risen in rural areas more than in cities, which makes passing a property tax increase harder there, Marquart said.

“We need to solve that gap,” Skoe added.

Sen.-elect Kent Eken, DFL-Twin Valley, said property taxes are up to eight times higher in rural parts of his northwestern Minnesota district than in urban areas.

“We are not second-class citizens,” he said.

But fixing the property tax problem would cost money.

“If you are going to put state revenue into property tax relief, it has to come from somewhere,” Skoe said.

Eken suggested that since rural taxes are rising faster than those in cities, “it is time to pursue a more equitable tax policy.”

Most Democratic-Farmer-Labor Party legislators hesitate to outright say they want to raise taxes, but that is a possibility. Also on the table is somehow expanding the state sales tax, although few suggest adding it to clothing or food.

Rep. Bud Nornes, R-Fergus Falls, said expanding the sales tax could “conceal” the tax increase. In recent weeks, talk has increased to reduce the overall 6.875 percent state sales tax rate but apply it to more goods and services.

Many services are not taxed. Neither are sales between businesses.

“We have a very high sales tax, but one of the most narrow in the country,” Rep. Denny McNamara, R-Hastings, said. “I think we’ll look at whether that should be broadened.”

Republicans generally claim that a Democrat’s idea of tax reform is raising taxes.

On the other hand, many Republicans promote cutting all taxes, Nornes said, but “under the current situation that probably is not possible.”

Regardless of warnings that tax reform may need to be delayed, some lawmakers expect that to happen.

“We’re going to have to look at tax reform,” Assistant Senate Majority Leader-elect Katie Sieben, DFL-Cottage Grove, said, noting that past budgets and the current tax structure have had “a negative impact on property taxes.”

Frans said the state needs to look at reducing reliance on property taxes.

Exemptions should be looked into as well, he said.

In 1987, there were nine credits or adjustments people could make on their taxes, but in 2010 there were up to 50, Frans said. About 40 cents of every dollar the state could have in tax revenue is claimed by tax breaks, he added.

The system also may need an overhaul as Minnesota’s demographics change.

People generally make the most when they are in their 30s, 40s and 50s, Frans said. But Minnesota’s population is aging, and as that happens, less tax money is available, especially in income tax.

User fees debated as stadium funding

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Vikings fans

By Danielle Nordine

A debate about whether gambling or user fees should be used to pay for a new Vikings stadium is the latest in a long fight over how to fund the project.

Two Saturday Capitol rallies previewed discussions expected when the House and Senate debate stadium funding plans.

“I think it’s a great idea,” Tom Schultz of Maplewood said of a user fee plan. “The people who buy those things are going to support the team anyway.”

Schultz and others attending a rally for the stadium said they would not mind the tax if it would keep the team in Minnesota.

“We love the Vikings and don’t want them to leave,” St. Paul resident Adam Oferosky said.

But new fees did not sit well with some attending a separate anti-tax rally outside the Capitol.

Angela Watson of Woodbury said that since user fees are “simply another tax,” she was not in favor of the plan. Even though it is aimed at stadium users, it could affect more people than that, she said.

But she also does not like the idea of expanding gambling to pay for the stadium either.

“The government shouldn’t have anything to do with a stadium,” she said.

Mark Quigley of Brooklyn Park agreed, saying lawmakers are being “bullied” by the National Football League to pay for the project.

Some stadium supporters simply wanted to make sure the deal gets done soon, even if the bill is not perfect.

John Schreiner said he is lobbying lawmakers to “stick with the deal we had.”

“It’s the best one we could fashion to bring the maximum number of folks together,” said Schreiner, who lives near the Metrodome in Minneapolis.

“It’s not a Vikings stadium, it’s the people’s stadium,” he added, noting it would be used for a number of other events other than football games.

“That’s why everybody should pay for it,” John Sullivan of Maplewood said.

Democrat and Republican lawmakers brought user fees to the forefront Friday during a contentious Senate committee meeting on the bill.

Tax Committee members moved the bill forward to the Senate floor, but many said they need more information about the financial impact of user fees before a full vote.

“We need to get to the heart of the question,” Tax Committee Chairwoman Sen. Julianne Ortman, R-Chanhassen, said. “Can user fees support a stadium?”

Revenue Commissioner Myron Frans said he could get the information in a few days. Lawmakers hope to adjourn for the year Monday.

Gov. Mark Dayton did not take a stand on the user fee issue Saturday, saying it is up to legislators.

Senate Minority Leader Tom Bakk, DFL-Cook, proposed a plan to impose a fee “basically on everything that happens at the new stadium facility,” from the sales of memorabilia and concessions to tickets and advertising.

He said user fees should be paired with the current funding proposal, which would cover the state’s portion of construction costs by allowing for electronic pulltabs and bingo.

Sen. John Howe, R-Red Wing, said user fees should replace gambling completely.

But bill author Sen. Julie Rosen, R-Fairmont, said such dramatic changes could jeopardize the bill.

“There are many great options for other revenues to pay for this stadium,” she said, “but those are revenue sources that cannot be agreed upon by all parties.”

Vikings Vice President Lester Bagley said the Vikings likely would not keep their current commitment of funds if the structure changes.

The current gambling proposal had some lawmakers questioning whether it is dependable and who it would affect.

“There’s no uncertainty here in terms of who’s paying for it,” Sen. John Marty, DFL-Roseville, said, calling a user fee plan reliable and fair.

Anti-tax rally

Stadium plan survives tough committee

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Howe

By Danielle Nordine and Don Davis

A Vikings stadium construction plan will receive a full Senate vote after what its Senate author described as a brutal Friday committee hearing lasting more than five hours.

Sen. Julie Rosen, R-Fairmont, said she expects the plan to pass the Senate, which may take it up Sunday.

“We fought back a lot of lousy amendments,” Rosen said.

One of those proposed amendments was by Sen. John Howe, R-Red Wing, who ended up as the swing vote that allowed the Senate Tax Committee to approve the stadium bill 7-6.

“It needs a lot of work,” Howe said, an indication that the bill faces a long debate in the Senate.

Rosen said the big news of the night was that the committee removed an amendment that would have added casinos at the state’s two horse-racing tracks to the stadium funding scheme. The so-called racino plan, she said, would have killed the stadium.

The Friday night vote means stadium-construction bills await full House and Senate votes after the National Football League team has tried for a decade to convince state leaders to approve a new stadium. Without a new stadium, Gov. Mark Dayton and other state leaders say, the team will leave Minnesota.

Much of the debate Friday night was like that heard for years: how to finance a stadium.

Several senators offered plans to pay for the stadium project with user fees, but all were rejected.

“This puts an entire business agreement in jeopardy,” Rosen said of a user fee proposal, adding it would have drained Vikings profits.

Howe said that senators do not have to accept a preliminary agreement among some state officials, the Vikings and Minneapolis. “It doesn’t necessarily have to be preordained. If we put something out there, everyone doesn’t have to be happy about it.”

The debate led the committee down a confusing path. On a voice vote, members agreed to recess until more information was available on the user fee plan. But Chairwoman Sen. Julianne Ortman, R-Chanhassen, called the committee back just a few moments later, before any more information was available.

Revenue Commissioner Myron Frans said he could get the requested information “in a few days,” knowing that legislative leaders want to adjourn for the year Monday.

Rosen’s comments about the problems with user fees came after Senate Minority Leader Tom Bakk, DFL-Cook, and others suggested funding plans for stadium construction such as taxing advertising, concessions, memorabilia, tickets and more.

“I think everybody that goes to a game is willing to help pay for a stadium,” Bakk said.

Howe took the concept a step further.

“The users of this facility should pay for it,” he said, proposing a plan that would be completely user-financed, eliminating the preferred funding method of charitable gambling taxes.

Opponents of the current plan, which would allow for electronic pulltabs and bingo to bring in more taxes, have cited concerns about expanded gambling. Others questioned whether gambling would bring in enough funds.

“Gambling is not a very consistent source of revenue. It never has been,” Sen. Gretchen Hoffman, R-Vergas, said.

Plans for stadium funding Rosen and Rep. Morrie Lanning, R-Moorhead, propose pay for the state’s $398 million portion of the construction costs by allowing for the electronic gaming devices.

Rosen and other supporters said the estimated funds from electronic gaming are very conservative.

A similar bill awaits a House vote, which has not been scheduled. The Legislature might miss a deadline as bill discussions continue.

“It’s beginning to look more and more likely that we can’t be done Monday,” Lanning said, referring to lawmakers’ goal of wrapping up the session then.

Rosen agreed.

Even if the House and Senate can pass their own versions of the bill soon, the two will have to be combined, and they have significant differences.

Lanning said he is “reasonably optimistic” he has enough votes for a stadium to pass the House.

The House is expected to meet Saturday afternoon. Whenever the House and Senate take up the stadium bill, debates could last 12 hours.

The $975 million stadium is the largest single-project bill in Minnesota history, Ortman said.

Besides the state’s contribution, the Vikings and other private sources would pay $427 million and Minneapolis would add $150 million for the stadium, which would be built on the current Metrodome site in Minneapolis.

Supporters pointed out that the stadium would be owned by the state and used for more than Vikings games.

“The purpose of this building is multi-faceted,” Sen. Rod Skoe, DFL-Clearbrook, said.

“This bill doesn’t seem like it’s ready for primetime yet,” Hoffman said, especially when it comes to discussions with St. Paul, which is asking for financial help for its sports facilities.

St. Paul lawmakers have argued their city should get help with its debt and sports facilities.

Sen. Roger Chamberlain, R-Lino Lakes, said the stadium deal is “a windfall for Minneapolis” and offered a failed amendment stripping Target Center aid.

Rosen’s bill provides $1.3 million a year for 20 years for St. Paul, which she said is a “placeholder” while negotiations between St. Paul and Dayton continue.

“To put a placeholder in here without a deal in place seems a little irresponsible,” Hoffman argued.

An amendment by Skoe that would extend a tax credits for construction projects in Bloomington was added to the bill by the committee.

The extension will allow for funding to lower a street near Mall of America and complete work at Bloomington light rail station. Skoe said it would provide for almost $2 billion in construction and will help projects planned for the area.

“I saw this as a vehicle to get this done,” Skoe said of amending it on to the Vikings bill.

He said the plan has been discussed before and is not controversial.

Rosen, however, said the Skoe provision probably will have to come out of the bill before it can pass.

Skoe

 

Hoffman

 

Bakk

Legislative notebook: House approves speeding up permitting

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By Danielle Nordine

A Republican push to streamline government and make it easier for businesses to build and expand moved forward Thursday when the House approved a bill 79-49 speeding up state permitting.

Bill author Rep. Dan Fabian, R-Roseau, said the changes will “help create a better economic climate and foster economic development in our state.”

A 150-day clock for the permitting process would begin when a business submits its application, according to the bill.

The proposal also allows businesses to hire licensed applicant professionals to assist with applications and would create a state coordinator to help businesses through the process.

“We are trying, from the very start, to increase communications,” Fabian said.

Permits mostly are issued by the Minnesota Pollution Control Agency and Department of Natural Resources.

This proposal fits with Republicans’ goals of streamlining government and helping business and builds on efforts that started in 2011 to speed up permitting, Fabian said.

Rep. Rick Hansen, DFL-South St. Paul, called the bill premature.

“The agencies are working on the reforms we adopted last year,” he said. “Not all sequels are great, and this is a sequel to last year’s bill.”

An amendment approved Thursday also would create a small pilot program for different, faster environmental reviews for some mining projects in northern Minnesota.

The amendment was introduced by Rep. Tom Anzelc, DFL-Balsam Township, who said “the goal is to shave off the time of the permitting process” for specific “low-risk projects.”

Tax awaits full vote

A tax plan is headed to the full Senate after 8-4 approval in committee Thursday, despite concerns about its funding.

The bill would phase out the statewide business property tax, as well as provide tax cuts for married couples, veterans and others.

To offset the more than $102 million in tax cuts planned next year, with more in the future, the proposal calls for cuts in state spending and using some of the budget reserve funds.

Management and Budget Commissioner Jim Schowalter said the bill “is taking us in the wrong direction” by using the reserves.

“The last two forecasts have been positive, and they’ve helped us restore some of our reserves,” he said. “This bill takes us going the other way.”

Those funds only would be used if the savings cannot be found by cutting state government spending, bill author Sen. Julianne Ortman, R-Chanhassen, said, adding she thinks there still is room to trim.

Revenue Commissioner Myron Frans said the governor also is skeptical of the jobs creation claims Republicans made about the bill.

Ortman, chairwoman of the Senate Taxes Committee, said she hoped House and Senate tax bills, which have “some substantial differences,” could be reconciled.

For example, the House bill cuts renters’ refunds to help offset tax breaks while the Senate version does not.

Keeping lights on

The Senate approved two measures Thursday that would state operations open should a shutdown like last summer’s occur again.

Sen. Al DeKruif, R-Madison Lake, put forward bills keeping the racing commission, state lottery, Gambling Control Board and state parks open even during a state government shutdown. The parks bill passed 37-28 and the gambling one received a 35-30 vote.

He said private companies such as racetracks should be able to continue business, and “the state parks in Minnesota are owned by the people of Minnesota.”

These are among many so-called “lights-on” bills proposed in reaction to state shutdown last year.

“To use the people of Minnesota as a pawn when the governor and Legislature can’t agree is wrong,” Sen. Paul Gazelka, R-Brainerd, said.

Democrats argued the bill focuses on the wrong angle.

“What this bill does is remove all the consequences for us not getting our work done,” Sen. Mary Jo McGuire, DFL-St. Paul, said. “I do think it sends the wrong message to the public.”

Legacy funding approved

Appropriation of legacy funds was unanimously approved by the Senate Thursday in the form of a bill carried by Sen. Bill Ingebrigtsen, R-Alexandria.

The bill would commit $5.5 million for Asian carp barriers and $1.8 million for a University of Minnesota aquatic invasive species research center, among funds for a number of other projects and programs.

The approximately $100 million in the so-called legacy funding comes from a sales tax voters approved in 2008 and is spent on a variety of outdoors, arts and cultural programs.

The House version of the legacy bill appropriates more money for those projects.

Legislators have said the university research center would develop better monitoring, deterrent and eradication procedures for invasive species, from carp and other animals to nonnative plants.

Ingebrigtsen noted the Legislature will be dealing with more environmental issues in separate bills.

“I think this is in the best interest of the people of the state of Minnesota,” Sen. Tom Saxhaug, DFL-Grand Rapids, said of the allotments.

Immunity could be gone

A bill clarifying that legislators who drink and drive are not immune from arrest unamimously passed a Senate committee Thursday and now awaits full House and Senate votes.

In Minnesota, legislators get what some consider a “get out of jail free” card protecting them from arrest for certain crimes, and some students from Concordia University in St. Paul are working to exclude drunken driving from that protection.

The students’ “No Boozin’ and Cruzin’ in Minnesota” bill adds drunken driving to an existing list of offenses that still could get lawmakers arrested.

Sen. Bill Ingebrigtsen, R-Alexandria, commended the students on the bill and said legislators should not be above the law.

Some senators questioned whether the immunity is from consequences or solely from arrest, but said they did not see the harm in adding this provision.