The T Word: Rest’s tax bill may be a non-starter

The tax bill introduced on Monday by Sen. Ann Rest (DFL-New Hope) (pictured) is the broadest package of tax code changes offered so far this session, but it’s getting decidedly mixed reviews at the Capitol. And the critics aren’t all Republicans.

SF1274 would phase out entirely the corporate income tax that Gov. Tim Pawlenty had proposed to cut in half. Under Rest’s plan, the 9.8 percent business tax would drop to 7.36 percent in 2010, 4.9 percent in 2011, 2.45 percent in 2012, and then disappear. Most of that revenue would be recouped through a broadened sales tax on clothing and legal/accounting services, which would be accompanied by a lower overall sales tax rate.

Rest has touted the proposal as revenue-neutral. And that’s a problem in the view of some Senate DFLers, who think Minnesota needs a revenue-neutral tax overhaul like a burning house needs a fresh coat of paint. While practically everyone respects Rest’s command of the tax system, there seems to be no shortage of skepticism about the political timing of the measure. In the words of one well-placed Senate DFLer, "Our problem this year isn’t pleasing the business community. It’s fixing the deficit."

Says another: "There’s such tremendous anxiety outside of this building now. People are concerned about their jobs, their families, their kids’ educations. They don’t want to pay more taxes. We’re going to have to do that, but taking the debate to this level with sales tax extenders is taking the debate to the governor’s court. How far do you stick your neck out just to let him chop it off?"