MPR: Senate Democrats Release Tax Plan

Senate Democrats Release Tax Plan
By Michael Khoo
Minnesota Public Radio
May 8, 2001

With only two weeks to go in the legislative session, Senate DFLers have finally released details of their $609 million tax relief bill. The package concentrates on property tax relief for mid-range homes. But House Republicans say the size of the cuts are an "embarassment." And Gov. Jesse Ventura's administration says the bill fails to meet any of the governor's criteria for reform.

THE SENATE TAX REDUCTIONS ARE HALF OF WHAT VENTURA HAS PROPOSED, and less than half of what the Republican-controlled House has approved. But DFLers say they want to place more resources into education, health care, and transportation - leaving less money for tax reductions. Senate Tax Chair Larry Pogemiller of Minneapolis says given the constraints, he's satisfied with the product.

"Based on the amount of revenue we have available to us, I think it's a fabulous bill. I think it does a tremendous amount of reform for the revenue we have. If revenue flows to the bill in the final compromise, I believe we will have bill that most Minnesotans would think that's the way we should do this," says Pogemiller.

"More than two-thirds of the cuts are focused on property tax reform and relief. And Senate Majority Leader Roger Moe says most of those reductions are targeted to homes valued in the $76,000 to $200,000 range. He says the House bill, by contrast, favors high-valued homes and commercial properties at the expense of mid- and low-valued homes and farms.

"We got it focused primarily on those homes that are most in need of property tax relief. We prevent what I think is a disaster in the House bill - once you go out about four or five years - by shifting major amounts of the property taxes on homes and farms," says Moe.

House Speaker Steve Sviggum says those shifts can be cushioned by holding property taxes down in general - and he says the House bill has important provisions to do so. Sviggum also criticized the Senate for releasing its proposal a week late. Sviggum says the Senate's timing was calculated to minimize scrutiny of its contents.

"The lateness of the Senate tax bill points to the puniness, the embarassment that this bill is to the taxpayers of the state of Minnesota. What they're trying to do is very, very much constrict the time available so citizens cannot compare the substantial, significant property tax reductions in the House tax bill versus the puny reductions in the Senate tax bill," says Sviggum.

The House plan cuts taxes by $1.5 billion, mainly through a complete take-over of the state mandated general education levy and the elimination of the medical provider tax. The House also rebates the entire current year surplus, estimated to be $856 million, by mid-summer. The Senate increases the state's share of the education levy at one-tenth the level of the House, makes no changes to the provider tax, and rebates only half the upcoming surplus. Revenue Commissioner Matt Smith says the House plan is closer to the governor's proposal - and he says the Senate plan fails on most important points.

"This tax bill I don't think meets the governor's mark in any of the three respects I talked about: rebating all the surplus, doing fundamental property tax reform that is based on getting rid of the general education levy completely, and thirdly doing sales tax reform," says Smith.

In fact, neither the Senate nor the House has accepted the governor's plan to expand the sales tax to services. Ventura says the move would modernize the state's tax system in a time when services constitute an increasing share of economic activity. House Republicans, however, say they can't justify a tax expansion in times of surplus. Senate Tax chair Pogemiller, however, says he remains open to the concept.

"The governor is correct that, as we reform the property tax, we should be reforming the sales tax. And so I will be continuing to make that point to my colleagues. I will continue to make that point in the tax committee. And as the committee works on the bill, who knows what'll happen?" says Pogemiller.

"But resistance remains high to a sales tax expansion. And Pogemiller admits even if he could find support for a broader sales tax, agreement on how to expand the tax and to what goods and services, could remain elusive.

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