Legislative notebook: House OKs matching Minnesota taxes with federal

Wills, Wiger

By Don Davis

Income tax returns Minnesotans file this spring will conform to new federal laws if state senators follow the House’s Monday action.

The House voted 127-0 to change state law to match newly enacted federal tax legislation, saving taxes for 55,000 teachers, 90,000 homeowners, 60,000 students and 32,000 small business owners. Supporters say it will save Minnesotans $18.5 million.

The new federal law established deductions that are not allowed under Minnesota law. Monday’s bill matches the two systems, giving Minnesotans more deductions, such as teachers who buy classrooms supplies with their own money, homeowners who claim an itemized deduction for mortgage insurance premiums, students who claim tuition deductions and business owners who qualify for some deductions.

The Senate has not taken up the issue. Until senators also pass the bill and the governor signs it, Minnesota taxpayers affected who already filed returns could be forced to file an amended return to get their credits.

Vets’ job help

Minnesota lawmakers will debate legislation to give businesses credit for hiring military veterans, with a goal of getting Minnesota veterans’ unemployment rate lowered.

A business would get a $3,000 tax credit for hiring a disabled veteran, $1,500 for an unemployed veteran and $500 for any other veteran.

Rep. Anne Wills, R-Apple Valley, said the aid would be “a drop in the bucket,” but when added to other tools available to veterans it could help them find work.

Twenty-three percent of Minnesota veterans do not have jobs, compared with a 6 percent statewide unemployment rate for all types of workers. That is about 30,000 veterans.

“We owe it to our veterans to do better,” Wills said.

Wills and Senate bill sponsor Sen. Chuck Wiger, DFL-Maplewood, said they do not know how much the tax credits will cost the state. However, they said the increase in taxes paid by newly employed veterans would offset whatever is lost by allowing tax credits.

U administration review

The University of Minnesota plans to spend $48,000 to examine its administrative structure.

The decision by the university’s Board of Regents to hire a consulting firm comes as some Minnesota lawmakers are questioning how much is spent on the university administration.

A private firm will review the layers of administration from top to bottom and the number of employees that directly report to each supervisor, the university reports. A goal of the study is to see if the university structure can be simplified.

“In short, the analysis will answer the question: Does the university have the appropriate number of organizational levels and do managers at various levels oversee the proper number of people?” university President Eric Kaler said.

A national news story recently said the university pays too much for administration, an issue that often arises this year when school officials go in front of legislative committees.

Legislators told Kaler to report back on the issue March 15.

Off-shoring upsetting

Sending jobs overseas upsets Minnesota unions, which say 2,525 Minnesota jobs were lost last year either by so-called off-shoring or increasing imports.

The union-based Minnesota Fair Trade Coalition says Minnesota lost the seventh most jobs of any state.

“Minnesota communities have been hit hard by off-shoring over the years, and the data shows that that trend doesn’t seem to be slowing,” said Steve Hunter, secretary-treasurer of the Minnesota AFL-CIO.

Down on tax

A poll shows Gov. Mark Dayton has a sales job to do if he wants Minnesotans behind his plan to lower the sales tax rate while adding the tax to services.

SurveyUSA-KSTP reports 55 percent are against the budget proposal the Democratic governor released three weeks ago, with 35 in favor and 10 percent not sure.

Even more, 59 percent, are against a proposal for businesses to pay a sales tax on services provided by other businesses. However, Minnesotans were nearly evenly divided about whether to charge sales tax on clothes valued at $100 and more.

On the other hand, Dayton’s proposal to tax the top 2 percent of wage earners gained support of 65 percent of Minnesotans.

When it comes to non-money issues, the poll showed Minnesotans generally like some gun-control measures being discussed by lawmakers and 54 percent do not want lawmakers to overturn a law banning gay marriages.

January funds good

Minnesota’s January state revenue was up 8.3 percent more than expected.

Minnesota Management and Budget on Monday announced individual income taxes were up nearly $140 million last month. Sales taxes also were up, but corporate taxes were down, leaving the total increase at $140 million.

What’s in, what’s out of Dayton sales tax plan

Here are some goods and services not now subject to the sales tax that the Minnesota Revenue Department says would be taxed under Gov. Mark Dayton’s tax reform proposal:

– Some on line sales

– Digital products

– Direct satellite services

– Remote access software

– Admission to stadium box seats and suites, exhibitions and selling events

– Ready-to-eat meat and seafood

– Clothing on items costing more than $100

– Admissions and memberships

– Over-the-counter drugs

– Personal services such as barber shops, beauty salons, tattoos, body piercing, nail salons, wedding planning, dating services, shoe shining, personal shopping

– Veterinary services

– Personal instruction such as dance, golf, tennis, etc

– Brokerage and investment counseling such as portfolio management, investment advice

– Bank charges and safe deposit box rental

– Legal services purchased by consumers

– Accounting services purchased by consumers

– Auto repair services

– Household goods repair and maintenance

– Warehousing and storage services (does not include storage of farm products or refrigerated storage)

– Taxicabs and other ground transport services (does not include public transportation or schools transportation)

– Travel agent services

– Legal services purchased by businesses

– Accounting and bookkeeping services purchased by businesses

– Architectural and engineering services

– Specialized design services such as interior decorating, industrial design services, graphic design services

– Computer services such as custom computer programming, computer systems design services,

– Computer facilities management services, data processing, hosting and related services

– Management consulting services such as administrative management consulting services, human resources consulting services, marketing consulting services, environmental consulting services scientific and technical consulting services, scientific research and development services

– Other consulting and development services such as environmental, sanitation, site remediation, safety, economic, security

– Advertising and related services such as advertising agencies, public relations agencies, media buying, agencies, media representatives, display advertising, advertising material distribution services

– Office administrative services

– Facilities support services such as snow plowing, cleaning

– Employment services such as temporary help agencies, employment placement agencies, executive search agencies, professional employer organizations

– Business support services such as telephone answering services, collection agencies, telemarketing services on contract, secretarial and court reporting services, document preparation services, private mail centers, collection agencies, credit bureaus, repossession services. marketing research, and public opinion polling, photographic services, commercial photography, translation and interpretation services

– Other support services such as packaging and labeling services, convention and trade show organizing

– Electronic and commercial equipment repair and maintenance

– Personal services purchased by businesses

– Telecommunications equipment

– Court reporter documents

– Advertising materials

– Publications such as newspapers, magazines, commercial printing

 

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The Revenue Department says these are examples of items that would remain exempt from sales tax:

– Food

– Clothing items and apparel less than $100

– Medical services, such as prescription eyeglasses, prescription drugs, hospitals and outpatient surgical centers, chairlifts, ramps and elevators in homes

– Parts and accessories to make motor vehicles handicapped accessible

– Nonprofit organizations, including fundraising sales

– Public safety items, including firefighters personal protective equipment, public safety radio systems, ambulances leased to private ambulance services

– Textbooks and personal computers required for school use

– Residential heating fuels and water services

– Agricultural items, including farm machinery and replacement parts, farm conservation programs, agricultural processing facilities

– Renewable energy systems, wind energy conservation systems, solar energy systems, biosolids processing equipment

– Veterans’ organizations

– Building materials for disabled veterans’ homes

– Construction materials for low-income housing

– Mining production materials

– Capital equipment

Bakk wants clothing tax

The Senate tax chairman, who is running for governor, wants to tax clothing as a way to increase school funding and plug the state budget deficit.

Sen. Tom Bakk, DFL-Cook, introduced legislation Thursday to eliminate the sales tax exemption on clothing beginning July 1 and slightly lower the overall sales tax rate a year later.

“This is a bold plan that, if enacted, would repay schools more than $120 million … reduce our budget deficit by more than $257 million in 2011 and permanently reduce Minnesota’s general sales tax rate from 6.5 percent to 6.25 percent, saving taxpayers and business owners millions of dollars on purchases,” Bakk said.

For the current two-year budget, with a $994 million deficit, the added money would be used to balance the budget. After the current two-year budget, the new money would go to schools.

Republicans do not like the idea.

“Minnesota families are currently overburdened with excessive taxes and Sen. Bakk’s call for new tax increases is simply the wrong approach to jump-starting Minnesota’s economy," Senate Minority Leader Dave Senjem, R-Rochester, said.

Outdoors spending plans taking shape

An influx of dedicated state tax revenue leads outdoors enthusiasts to believe a logjam of Minnesota natural resources projects will begin to free up this year.

State lawmakers are completing work on two outdoors spending packages that would pump tens of millions of dollars into conservation projects around the state.

Both are paid for outside the traditional state budgeting process and are protected by the Minnesota Constitution. Environmental research is the focus of one pot of money, wildlife habitat restoration and water cleanup projects the emphasis of the other.

Together, the programs are expected to spend roughly $165 million over the next year. Projects range from soil surveys in northeastern Minnesota to invasive earthworm detection around the state and from the restoration of western Minnesota prairies to the reduction of lake and river pollution.

Full story and audio

Reaction mixed to property tax plan

Buzz Anderson

Cities can accept a large property tax reform bill, counties don’t know what to think about it and non-profit organizations love it.

And its chief author is optimistic that he can convince Gov. Tim Pawlenty to accept at least part of the measure.

The bill written by Rep. Paul Marquart and others features a provision allowing Minnesota counties to institute a half-percent sales tax instead of raising property taxes. Marquart, DFL-Dilworth, said that would ease property taxes on the poorest Minnesotans because the sales tax is easier for the poor to handle since there is no tax on food and clothing.

Full story, photos, audio

Plan raises sales, not property, tax

Rep. Paul Marquart

Counties would get new taxing authority, local levy limits disappear and some charitable organizations would be relieved of paying property taxes under a Democratic tax plan unveiled Monday.

To make up for anticipated state aid reductions, the proposal allows counties to impose a 0.5 percent sales tax increase instead of raising property taxes.

Voters could attempt to remove a county’s sales tax increase under certain conditions. Also, the plan removes property tax levy limits put into law in 2008 next year for cities and in 2011 for counties.

House Property Tax Chairman Paul Marquart, DFL-Dilworth, said the proposal would result in “very few” property tax increases and increases accountability to property taxpayers.

The proposal is part of House Democratic-Farmer-Laborites’ plan to erase a $4.6 billion state budget deficit in a new two-year budget plan.

“It’s how can we balance the budget while still trying to protect property owners, jobs and essential (government) services,” Marquart said.

The plan is problematic in part because a sales tax increase in counties along Minnesota’s border would leave businesses in those counties less competitive with neighboring states, said Rep. Pat Garofalo, R-Farmington, a property tax committee member.

Setting a limit on property tax increases is a better way to control property taxes, Garofalo said.

Levy limits are not effective, Marquart said, because local governments often set their levy at the cap, rather than at a smaller rate increase.

The committee will take public testimony on the bill today; the committee will vote on the bill Wednesday.