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Negotiators agree on tax plan
By Michael Khoo, Minnesota Public Radio
June 27, 2001

House and Senate negotiators have signed off on a major property-tax reform bill that will produce double-digit cuts for all property categories. The $760 million measure is set for a House vote today and could be up in the Senate this evening or tomorrow. The Ventura administration and GOP leaders are hailing the package as historic, but some Democrats say the changes may pinch homeowners down the road.

AFSCME members picketed the Capitol, and nearly 60 other state buildings in Minnesota, on Tuesday, protesting the possibility of a government shutdown. Read more about this story.
for a sweeping overhaul of property taxes last fall when he first proposed abolishing the state-mandated general education levy. Eliminating those taxes, and replacing the funding with a projected state surplus, produces significant cuts in local property taxes. Revenue Commissioner Matt Smith says the final product covers 95 percent of Ventura's property tax reform plan. He says the governor will be pleased. "When you think about where we started back on Labor Day, I don't think a lot of people probably gave this a whole lot of chance of happening. And now we're at the doorstep of it happening. So he should feel good about that," Smith said.

The administration estimates average property taxes will drop roughly 25 percent for homes, apartments, and farm houses. Businesses and cabins would see approximately 10-percent reductions.

Republican House Tax Chair Ron Abrams of Minnetonka says in addition to the cuts, the bill contains important reforms. The measure reduces disparities that tax homes at lower rates than businesses and apartments. And by eliminating the state-mandated education levy Abrams says the plan untangles a complicated relationship between state and local governments and allows more citizen control over tax increases.

"I think we've done about all we can do on a rate structure. We've gone a fair amount down the road on the untangling the fiscal relationship. And the fact is that there's a lot of relief in the bill, too," Abrams said.

But Senate DFLers are more cautious. They point out the rate changes will force homes to pick up a larger percentage of the total tax burden than they currently pay.

Sen. Larry Pogemiller, DFL-Minneapolis, who chairs the Senate Taxes Committee, says although most taxpayers should see immediate cuts, low- and mid-valued homes might feel a heavier burden in the future. "History will tell. And I think we will know a few years from now if this is historic reform that we should be proud of or whether it's historic reform that there should have been more concern than there was on it," he said.

DFLers held out for - and received - increases in the property-tax refund that should cushion some of the shift to homeowners. And they also linked future growth in a new statewide tax on businesses and cabins to education funding. Democrats say that will help stabilize money for K-12 schools. Missing from the final bill, however, were key provisions championed by Ventura.

The governor had originally asked for a cut in the sales-tax rate coupled with an expansion of that tax to services. Commissioner Smith says the administration nonetheless is glad to have opened the debate. "We feel good and the governor should feel good that we put the right issues on the agenda. And those are issues that are not going to go away. The issue of modernizing the sales tax is not going to go away," Smith said.

The bill also calls for a roughly $700 million sales-tax rebate that should go out to taxpayers by September. The tax bill, which for weeks seemed to be at the center of a budget impasse, is now cleared for votes in both the House and Senate. However, the stalemate continues on other fronts. Several spending and policy proposals remain under discussion, and legislative leaders acknowledge a deal is a long way off on bills to fund transportation and health and human services.