Tax cuts move ahead

ST. PAUL - The fundamental disagreement about how to help Minnesotans financially, cutting business taxes or providing tax relief to citizens, captured the spotlight Wednesday as Republicans push business-tax cut bills through the Minnesota Legislature.

House Tax Chairman Greg Davids called his tax bill "the tax relief and job creation bill" before his Republican colleagues joined him Wednesday night in passing a bill that would phase out a statewide business property tax and reduce a property tax refund renters receive.

The 72-62 House vote was party line, with the Republican majority on top after a three-hour, 10-minute debate.

Senate Republicans, meanwhile, introduced their own bill to eventually end the statewide business property tax, but they do not propose reducing the renters' refund. The bill is being considered in the Senate Taxes Committee today.

The tax cut advances are the culmination of work Republicans began early last year when they took control of both legislative chambers for the first time in nearly 40 years.

"We want Minnesota's tax climate to be competitive," Senate bill author Sen. Julianne Ortman, R-Chanhassen, said.

While Republicans said tax cuts would allow businesses to create more jobs, Democrats said the House bill, in particular, would take money from poor and middle-class Minnesotans so businesses can have greater profits.

"This bill puts corporations ahead of senior citizens and middle-class families." Rep. Paul Marquart, DFL-Dilworth, said.

"This is not Minnesota nice," he added. "This is extreme."

Democratic Gov. Mark Dayton has criticized several provisions in the House and Senate bills and is not expected to sign either. Davids indicated he is willing to negotiate with Dayton.

The House tax bill would reduce statewide business property taxes 70 percent of the first $150,000 of value and phase out the statewide tax over 12 years.

Other House provisions include:

* Reducing by $70 million the amount of property tax refunds renters receive; however, the elderly and disabled would keep much of what they receive now.

* Freezing Local Government Aid payments to cities bigger than 5,000 population at current levels.

* Extending a tax credit for northwestern Minnesota farmers whose cattle herds were affected by bovine tuberculosis.

* Eliminating property taxes for two years on newly built homes in flood-damaged border cities such as Moorhead.

* Increasing tax credits for people who invest in new businesses, especially in rural Minnesota.

* Allocating $150,000 for Moorhead, Dilworth, East Grand Forks, Breckenridge and Ortonville to help businesses compete with lower North Dakota taxes and workers' compensation costs.

Marquart complained the GOP bill does nothing to help reduce $371 million in property tax increases that stem from the budget bill lawmakers passed last year.

The renters' tax refund cut means $103 less per year for senior citizens, Marquart added.

Rep. Tom Anzelc, DFL-Balsam Township, said his northern Minnesota property owners are especially hurting.

"Property taxes in northern Minnesota, northern rural Minnesota, are exceeding the statewide increase for property taxes by over 30 percent," Anzelc said. "And that's not right."

The House plan would cut business property taxes $40 million next year and $117 million the following year.

The Senate proposal would give more than $102 million in tax cuts next year, with more planned in the future.

The Senate tax cuts would be offset by trimming state government spending and using some of the budget reserve funds while the House plan gets tax-cut funds in part by reducing the renters' refund.

To phase out the state's business property tax, the Senate GOP plan would reduce the taxes to roughly the 2010 levels through 2016, and then drop each year until they are eliminated by 2026.

"It's becoming a burden to Minnesota businesses," said Ortman, also chairwoman of the Senate Taxes Committee, said of the business property tax.

Ortman's proposal would give married couples a tax break in 2012 and give other credits to members of the military and veterans.

Objections to the Senate plan surfaced quickly.

"There's some good stuff in here and some bad stuff in here, but you're paying for it with money from the reserves," Sen. Rod Skoe, DFL-Clearbrook, said. "I'm astounded."

Davis and Nordine work for Forum Communications Co., which owns the Daily Globe.