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The Incredible Shrinking Income Tax Cut
By Michael Khoo, Minnesota Public Radio
April 26, 2001
Part of MPR's online coverage of Session 2001
Click for audio RealAudio

Prospects for a major state income-tax cut appear dim. House Republicans, who previously championed the idea of across-the-board income-tax cuts, say they're now leaning towards substantial property-tax reform and relief. Gov. Jesse Ventura and Senate DFLers are also promoting property-tax cuts, but some conservative groups say House leaders are compromising their principles.

House Speaker Steve Sviggum says the size of the cut is perhaps more important than the type.
HOUSE REPUBLICANS LED THE FIGHT to reduce income taxes across the board in each of the last two sessions, but with a major federal income-tax cut almost certain, GOP leaders are considering a greater emphasis on property-tax cuts. Gov. Ventura has made property-tax reform a centerpiece of his budget, and House Speaker Steve Sviggum acknowledges at least part of the strategy is to ally with Ventura and force Senate DFLers into a corner.

"We're looking at trying to be successful at the end game, a substantial tax cut at the end of the legislative session, and to have something in common with Gov. Ventura is not the worst thing, and maybe reducing some taxes over other taxes is a better choice, but reducing any tax burden is good," Sviggum says.

Sviggum says details of the House tax bill will be available early next week. For now, he notes the package will cut taxes by $1.5 billion through a mixture of property-tax relief as well as some income-tax cuts and a reduction in the medical-provider tax. But the conservative Taxpayers' League of Minnesota says income-tax relief should be the focus. League Legislative Director David Strom says property-tax cuts are often illusory. He says as the state-mandated burden eases, local governments can raise their own collections, leaving property owners with no long-term relief.

"Because of rising property values there's this automatic escalator in your property taxes. It doesn't have to be there. Local government can choose not to take that money and spend it. But history says that they charge what the market will bear. So we think it's very important to have tax relief that goes back to taxpayers and not to some other entity that they hope will pass the savings on to you," Strom says.

House Republicans say along with tax relief, they'll provide tax reform to prevent county and city governments from capturing all the relief dollars. Taxes Committee Chair Ron Abrams of Minnetonka says one option is to allow taxpayers the opportunity to overturn taxing decisions through referenda.

"People ought to get involved more. I believe in reverse referendums so that if you do have an out-of-control city council, that voters have an opportunity to be able to express themselves," Abrams says.

Senate DFLers have leaked few details of their tax package. But Senate Taxes Committee Chair Larry Pogemiller of Minneapolis says they've favored property-tax cuts from the beginning. He welcomed the House emphasis on similar cuts.

"If the House is considering focusing on property-tax relief, I think we view that as a significant victory already because we know that their original intention was to do income-tax relief at the high end, and to the extent that they're now focusing on property-tax relief; I think that's good," according to Pogemiller.

But even as House Republicans give up a traditionally favored mechanism for relief, they say they're far from conceding defeat. Sviggum notes the House and the governor are aligned on the amount of tax cuts - roughly $1.5 billion. The Senate has budgeted just over $600 million. Sviggum says the size of the cut is perhaps more important than the type.