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Minnesota Senate backs tax-cuts; House vote next

March 21, 2014
Associated Press

ST. PAUL, Minn. (AP) — A tax-relief package affecting hundreds of thousands of Minnesota residents was on the cusp of becoming law Friday.

The Minnesota Senate voted 58-5 to approve the $443 million plan, sending it to the House for final consideration. The House could seek further negotiations, but that didn't seem likely because of a shared sense of urgency to get it done this week.

Democratic Gov. Mark Dayton said he would sign the bill immediately. Department of Revenue officials say people who have already filed returns may get automatic checks while others will need to file amended forms.

Among the recipients would be those eligible for working family credits, recent college graduates paying off loans and people receiving certain tuition allowances. Those who lost homes to foreclosure or unloaded them in short sales in the last year would get some of the largest relief. Dayton's administration said at least 300,000 and as many as 500,000 tax filers could qualify for one or more breaks.

The bill also would repeal three controversial business sales taxes beginning in April and would allocate $150 million to the state's reserve funds.

The proposal marks a sharp turn from last spring, when lawmakers digging out of a budget hole and intent on repaying old IOUs raised taxes by more than $2.1 billion. A recent economic report showed Minnesota was on pace to have a $1.2 billion surplus by the summer of 2015.

"We know we faced very, very terrible times last year dealing with a deficit that had been in the making for a number of years," said Sen. Ann Rest, DFL-New Hope. "We have tax relief we are giving today that speaks of a fairly conservative approach to the good times we are enjoying now."

Republicans, who are a minority in both legislative chambers, said the state's ample surplus should have given lawmakers even more room to reduce taxes. They refused to call it a tax cut because it pales in comparison to the amount taxes were raised last year.

"We need to be careful about doing any victory laps in the back of the chamber. We shouldn't be doing any backslaps. We shouldn't be proud of ourselves," said Sen. David Osmek, R-Mound.

His party made several unsuccessful attempts to beef up the amount being sent back, such as exempting military pensions from the income tax and accelerating an expanded tax deduction for married filers so it would happen instantly. Under the bill, the increase in the standard deduction for couples won't start until people file taxes next year when they would average $115 in savings.

"If the lifting of the marriage penalty is a good idea next year, it's a good idea this year," said Rochester Sen. David Senjem.

Senate Taxes Committee Chairman Rod Skoe, DFL-Clearbrook, said such a change would require more than $70 million. He also said it could pose logistical problems because it involves 650,000 returns that would have be recalculated by the Revenue Department or amended by the taxpayers.

Without counting the amount set aside for the reserve funds, the Legislature will have designated about half of the state's surplus and has about two months before the session's adjournment to figure out what to do with the rest.

It's unusual for a package of this size to pass barely a month into the Legislature's session. An April tax filing deadline spurred the urgency.

Even then, it had a choppy path. The House approved a separate version in early March but the Senate waited weeks to advance its own. That drew a sharp rebuke from Dayton, who on Tuesday accused Senate Majority Leader Tom Bakk of putting off a vote unless one of his pet projects — a new office building for senators — won high-level backing. Bakk denied the office building accusation and tried to set up a quicker tax vote. Republicans balked, deferring a final vote until Friday.

The House planned to convene for a late-afternoon debate.


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