The T Word: Senate Taxes Committee omnibus highlights

As we predicted in last Friday’s edition of the PIM Weekly Report, Sen. Tom Bakk’s (DFL-Cook) (pictured) omnibus tax bill seeks to raise its entire revenue target–$2.2 billion–by essentially reinstating the tax rates that existed in the state in 1998, before the first of a pair of extensive income tax cuts during the Jesse Ventura administration. But the reversion would be temporary. The new rates (6 percent on household income up to $33,220; 7.7 percent on income from that threshold to $131,700; 8.5 percent on income up to $250,000) would end in 2014.

The only element of surprise in the income tax proposal is the addition of a new top bracket of 9.25 percent for adjusted gross incomes over $250,000. Bakk had told the AP’s Martiga Lohn last week that he wanted to avoid a new fourth bracket because it might drive out some individuals who could create jobs, but in the end he needed it to meet his revenue target: By itself, the restoration of 1998 income tax rates was estimated to raise only $1.7 billion.

The new top bracket also represents the closest thing to a point of agreement on revenue sources between the Senate and House tax packages. The House bill, released yesterday [PIM item], proposes a new fourth bracket of 9 percent for incomes over $300,000. But the House bill also made modest cuts to Minnesota’s first and second bracket rates.

Bakk defended his approach, which would result in higher tax bills for about 85 percent of the state’s taxpayers, by citing a pair of statistics on behalf of his contention that it was a progressive solution to the state’s budget bind. First, he said, about 80,000 of Minnesota’s wealthiest households, representing 3.5 percent of the state’s taxpayers, would contribute 40 percent of the new revenue under his plan. Second, the top 14 percent of households would kick in about 60 percent of the new revenue.

More:

• The Senate omnibus incorporates a proposal by Sen. Julianne Ortman (R-Chanhassen), the committee’s ranking minority member, to levy a tax on businesses who make short-term loans at interest rates over 15 percent. That’s projected to raise $216 million for the biennium. A companion measure carried in the House by Rep. Tom Rukavina (DFL-Virginia) did not make it into that chamber’s omnibus bill, however.
• The bill proposes raising Minnesota’s Alternative Minimum Tax to 7 percent temporarily. The rate would return to the current 6.4 percent in 2013.
• The taxes committee also had to reduce its "expenditures" by $240 million to meet its Senate cut targets. In practice, this means rescinding exemptions or loopholes in the tax code so that more revenue flows to the state. Sen. John Marty (DFL-Roseville) took Bakk to task for giving the biggest hit to renters and lower-income homeowners. Cuts to rent credits and property tax rebates account for $108 million of the $240 million package.
• Local government aid (LGA) takes a $30 million hit in Bakk’s proposal in FY2010-11, and a $64 million hit in the 2012-13 biennium. Gov. Tim Pawlenty’s budget targets LGA for $442 million in cuts in this biennium and $469 million in ‘12-’13.
• The Mall of America–and the construction companies looking to work on its expansion–come in for special consideration in Article VI of the bill. Under the terms of Section 15, a current prohibition on drawing down aquifers for purposes of "a man-made lake, water park, or similar entertainment venue" would be stricken down, as would a prohibition against building a "theater, auditorium, or similar live entertainment venue."
• The bill would also authorize a $3 million loan from the Minnesota Investment Fund to help lure a Swiss company that specializes in customizing and detailing private jets. Minnesota is currently competing with Indiana for a U.S. plant the company wants to build. Between 200 and 500 manufacturing jobs could be at stake over a five-year period.
• The omnibus includes a measure proposed by the League of Minnesota Cities that would allow local governments to issue emergency debt certificates to cope with any fiscal crises–prompting Sen. Larry Pogemiller (DFL-Minneapolis) to question whether cities might dig themselves a deeper hole than they could climb out of on their own. Bakk suggested the short duration of the certificates–which must mature within two years–should mitigate that problem.
• A couple of rare instances of agreement in the fine print of the House and Senate tax bills: They both go after Pawlenty’s pet JOBZ program, and they both contain provisions requiring fuller disclosure from predatory tax preparer companies that offer high-interest "refund anticipation" loans or payments.

7 Responses to “The T Word: Senate Taxes Committee omnibus highlights”

1. Anonymous Says:
   April 22nd, 2009 at 11:48 am

   Once again, Senator John Marty is standing up for those who need it most! Ironically, John Marty was the ONLY Senator to stand up against the 99 and 2000 tax breaks that have gotten us in this mess in the first place! He’s been right all along! That’s the bold, visionary leadership we need in the Governo’rs office!! http://www.johnmarty.org

2. Anonymous Says:
   April 22nd, 2009 at 11:31 pm

   Reverting to 1998 is not progress. It is confirmation that legislators don’t have the intestinal fortitude and/or brains to introduce meaningful changes which exist in draft form in the files of the research departments of both houses (and the tax staffs and, presumably, tax chairs know it). The AMT should be rescinded and if a similar mechanism is needed, it should include indexing to avoid the problems that exist now. The same folks that keep a lid on local levies now see merit in allow for special “emergency debt certificates!” Ah, but we do find the old sneaky language neutralizing provisions of earlier legislation that had “comfort language,” namely the special exclusions for the Mall of America…..a new football stadium will likely be buried in the conference committee product. Senator Bakk, particularly, is neither creative or consistent, but then again neither is mentor Pogemiller.

3. Anonymous Says:
   June 19th, 2009 at 11:58 pm

   The Senate Higher Education Budget and Policy Division released the committee’s omnibus bill earlier this week. The committee did not take any action on the bill, but members are expected to pass it out of committee.
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4. Anonymous Says:
   June 20th, 2009 at 5:01 am

   files of the research departments of both houses (and the tax staffs and, presumably, tax chairs know it). The AMT should be rescinded and if a similar mechanism is needed, it should include indexing to avoid the problems that exist now. The same folks that keep a lid on local levies now see merit in allow for special “emergency debt certificates!” Ah, but we do find the old sneaky language neutralizing provisions of earlier legislation that had “comfort language,” namely the special exclusions for the Mall of America…..a new football stadium will likely be buried in the conference committee product. Senator Bakk, particularly, is neither creative or consistent, but then again neither is mentor Pogemiller. Online GED test & School diploma at home | Online High School

5. Anonymous Says:
   June 26th, 2009 at 3:19 am

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6. Anonymous Says:
   June 30th, 2009 at 2:57 am

   Each dollar of WIC funding in the stimulus bill is one less dollar that needs to be found from other sources in the omnibus appropriations bill in order to make WIC whole for 2009.
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7. Anonymous Says:
   July 2nd, 2009 at 11:06 pm

   WIC needs to be wiped out all together. It gives these “parents” a free pass to not pay for their kids and makes them think it’s OK.

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