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Danielle Killey and Don Davis, Forum News Service, Published April 29 2013

After uncertainty, Minn. Senate passes tax bill

ST. PAUL – Minnesota senators passed a tax plan 35-31 on Monday – eventually.

It took two tries, but they moved the bill forward, nearly two hours after it initially failed 34-32, with seven Democrats voting “no.”

The second vote set the stage for legislative leaders and Gov. Mark Dayton to hammer out a final budget plan.

The Senate tax bill, sponsored by Sen. Rod Skoe, DFL-Clearbrook, would raise income taxes on the top bracket. It also would lower the sales tax rate to 6 percent while expanding what is taxed to more items such as clothing, auto repairs and digital downloads. It includes a cigarette tax increase of 94 cents per pack.

“Some people pay more and some people pay less, but you do better in the end,” Skoe said. “Reform isn’t easy.”

All but one Republican, Sen. Dave Senjem of Rochester, voted against the plan. Five Democrats joined them.

Sen. Greg Clausen, DFL-Apple Valley, and Sen. John Hoffman, DFL-Champlin, originally voted “no” but switched to support the bill the second time.

The income tax change, which raises the top rate from 7.85 percent to 9.4 percent, was a key concern for Sen. Susan Kent of Woodbury, one of the Democrats who voted against the bill both times.

She said there are good pieces of the plan, but that change is a concern for her constituents.

Most of the DFL lawmakers who voted against the plan come from suburban Twin Cities areas.

“There is a lot of mutual respect for the fact that we do represent diverse districts,” Kent said of Democrats.

The initial tax vote was one of the most dramatic in recent years as the vote remained tight for about 10 minutes, with several senators not voting and others switching from “yes” to “no” or vice versa.

As Senate President Sandra Pappas, DFL-St. Paul, ordered voting to end, three Republicans who were voting “yes” quickly changed to “no” and the bill failed.

Senate Majority Leader Tom Bakk, DFL-Cook, immediately called a private meeting of his members in a room just off the Senate chambers.

After senators voted to reconsider the vote, Pappas told colleagues that she jumped the gun in closing the vote. Sen. Ann Rest, DFL-New Hope, said she was “stunned” that Pappas ended the vote because she had not yet pushed her voting button.

Bakk said that in the DFL meeting he did not twist arms, only explained that they had voted for spending bills and now it was time to vote to raise taxes to support that spending.

Kent said she was not pressured to change her mind.

“There were no screws being tightened,” she said.

The tax bill “always is a hard vote,” Bakk said.

Bakk said several of those who voted “no” the first time around volunteered to switch. He said DFL leaders did not count votes in advance.

Senate Minority Leader David Hann, R-Eden Prairie, said the fact that the DFL originally defeated its own tax bill should be significant to Minnesotans because it shows that “even members of the DFL caucus know this is not a good bill.”

Republicans said the tax plan will hurt families, individuals and businesses.

“This is a tax attack on everyone who lives in Minnesota or even puts a foot in Minnesota,” said Sen. Paul Gazelka, R-Nisswa.

“If we step back and really think about what’s best for the state, this tax bill is not it,” said Sen. Julie Rosen, R-Fairmont.

Dayton had proposed a similar sales tax change but dropped it after strong opposition.

The state faces a $627 million deficit for the next two years and lawmakers also want to cover new investments in areas such as education. The Senate tax plan raises $1.84 billion.

“I think it’s important for us to put our budget on a course of stability going forward,” Skoe said.

The bill includes $33 million over the next two years for Capitol building repairs, which Republicans said should not be part of the tax plan.

Skoe said there is a lot for Minnesotans to like in the bill.

The Senate tax plan would eliminate state sales tax paid by cities and counties and adds funding for local governments, including townships.

The bill includes specific tax breaks for Rochester’s Mayo Clinic expansion, work at the Mall of America and for a potential new biopharmaceutical manufacturing facility in Brooklyn Park.

“It moves forward government interests at the expense of the Minnesota taxpayer,” Sen. Torrey Westrom, R-Elbow Lake, said.

The Senate bill would remove a law that since the 1980s has given five communities near the North Dakota border an ability to provide tax cuts to keep and attract businesses.

“We have a unique situation now that we are facing: North Dakota now has the oilfields,” Sen. Kent Eken, DFL-Twin Valley, said, and the neighbor to the west can keep lowering taxes.

But Eken said other parts of the overall bill help all of Minnesota, including border communities. One provision, called a disparity reduction credit, gives border communities a continued ability to provide tax aid to companies near other states with better tax climates.

“I don’t support every provision in this bill, but overall this bill is a good one,” Eken said, noting the Skoe legislation would cut property taxes and provide a better state revenue foundation.

Skoe’s plan also includes greater Minnesota internship program and business expansion credits.

Minnesota tax plans vary

ST. PAUL – The Minnesota House, Senate and governor’s tax plans vary in how they raise funds to cover a $627 million projected deficit and new investments. Here are some highlights from the three plans and how they compare:

• Income taxes: Senate, raise third tier rate from 7.85 percent to 9.4 percent; House, new fourth tier, 8.49 percent for couples making more than $400,000 a year in taxable income, temporary surcharge on couples’ income more than $500,000; governor, new fourth tier, 9.85 percent for couples making more than $250,000.

• Sales tax: Senate, lower from 6.875 percent to 6 percent, tax more items including clothing; House, no change; governor, no change.

• Alcohol tax: Senate, no change; House, increase at wholesale level, about 7 cents per drink for consumers; governor, no change.

• Cigarette tax increase from current $1.23 per pack: Senate, 94 cents; House, $1.60; governor, 94 cents.