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Senate tax bill takes slightly different route

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Senate tax bill takes slightly different route
Bemidji Minnesota P.O. Box 455 56619

ST. PAUL -- Senate Republicans would cut some state aid to cities, lower a statewide business property tax and increase property tax refunds for homeowners making less than $100,000 a year.

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But in a bill they released Wednesday they do not support House-proposed income tax cuts and they abandon the most prominent part of the earlier discussions, cutting corporate income taxes.

"Right now, we are focused on property tax," Senate Tax Chairwoman Julianne Ortman, R-Chanhassen, said.

The bill contains $200 million in tax relief, she said, mostly for property taxes.

The Senate bill, like the House version, faces strong opposition from Democrat Gov. Mark Dayton, who wants to raise income taxes on the richest 5 percent of Minnesotans and maintain aid sent to local governments. The House and Senate bills are more similar than different, especially in not raising state taxes.

Local aids are included in the tax bill because they are designed to help communities that have low property tax capacities.

Senate Republicans would cut $640 million from local aids. Ortman's bill would eliminate a type of local aid known as market value credit that goes to most cities.

The bill also reduces aid sent to regional centers and communities that host large numbers of out-of-town workers. Cities could add a local sales tax of up to 0.5 percent to make up for the lost money, but only if voters approve.

More than a third of cities would receive less Local Government Aid, the largest state payment to local governments. Other communities, mostly smaller towns, generally would receive about the same LGA as they did this year.

In 2013, aid paid to cities and counties would be reduced further.

"These programs have grown substantially since LGA was introduced in 1971," Ortman said.

Democrats said aid cuts would force local governments to raise property taxes.

The cuts will not survive if the bill reaches Dayton's desk, Senate Minority Leader Tom Bakk, DFL-Cook, said.

Bakk said that one of Dayton's fundamental beliefs is that the state needs to continue support for local governments.

Another main Dayton belief is that rich Minnesotans should pay the same percentage of taxes as others, Bakk said, and Republicans say they will not state taxes.

The House plan would lower the bottom two income tax tiers, which results in larger tax breaks for the wealthy than poor or middle-income Minnesotans.

Assistant Senate Majority Leader Doug Magnus, R-Slayton, said most of the 50 small communities in his district would get the same LGA payments as in the past, but other provisions would help his area.

He said a statewide business property tax cut should be good news because it would save money for most businesses, while a corporate income tax cut only benefits those making money.

Also, Magnus said, small businesses and farmers would benefit by a provision that increases the value of property not taxed by estate taxes after an owner's death.

Bakk said several provisions in the Senate bill would hurt the Iron Range. Included are reductions of "payments in lieu of taxes" that several entities pay to local governments for property that is not subject to property taxes.

There are enough cuts that the Iron Range Rehabilitation and Resources Board would lose its funding, the senator said.

Also in the Senate bill are provisions to:

E Negotiate with Wisconsin a restoration of "tax reciprocity," which until this year had allowed residents of one state who work in the other to file just one income tax return.

E Allow some cities, including Fergus Falls and Hutchinson, to impose local sales taxes.

E Reduce the state renters' property tax credit.

E Eliminate of a sustainable forest initiative that provided funds to preserve forests.

E Reduce and eventually eliminate payments to some northwestern Minnesota communities to help them compensate for being near low-tax North Dakota.

Don Davis works for Forum Communications Co., which owns the Bemidji Pioneer.

ST. PAUL -- Senate Republicans would cut some state aid to cities, lower a statewide business property tax and increase property tax refunds for homeowners making less than $100,000 a year.

But in a bill they released Wednesday they do not support House-proposed income tax cuts and they abandon the most prominent part of the earlier discussions, cutting corporate income taxes.

"Right now, we are focused on property tax," Senate Tax Chairwoman Julianne Ortman, R-Chanhassen, said.

The bill contains $200 million in tax relief, she said, mostly for property taxes.

The Senate bill, like the House version, faces strong opposition from Democrat Gov. Mark Dayton, who wants to raise income taxes on the richest 5 percent of Minnesotans and maintain aid sent to local governments. The House and Senate bills are more similar than different, especially in not raising state taxes.

Local aids are included in the tax bill because they are designed to help communities that have low property tax capacities.

Senate Republicans would cut $640 million from local aids. Ortman's bill would eliminate a type of local aid known as market value credit that goes to most cities.

The bill also reduces aid sent to regional centers and communities that host large numbers of out-of-town workers. Cities could add a local sales tax of up to 0.5 percent to make up for the lost money, but only if voters approve.

More than a third of cities would receive less Local Government Aid, the largest state payment to local governments. Other communities, mostly smaller towns, generally would receive about the same LGA as they did this year.

In 2013, aid paid to cities and counties would be reduced further.

"These programs have grown substantially since LGA was introduced in 1971," Ortman said.

Democrats said aid cuts would force local governments to raise property taxes.

The cuts will not survive if the bill reaches Dayton's desk, Senate Minority Leader Tom Bakk, DFL-Cook, said.

Bakk said that one of Dayton's fundamental beliefs is that the state needs to continue support for local governments.

Another main Dayton belief is that rich Minnesotans should pay the same percentage of taxes as others, Bakk said, and Republicans say they will not state taxes.

The House plan would lower the bottom two income tax tiers, which results in larger tax breaks for the wealthy than poor or middle-income Minnesotans.

Assistant Senate Majority Leader Doug Magnus, R-Slayton, said most of the 50 small communities in his district would get the same LGA payments as in the past, but other provisions would help his area.

He said a statewide business property tax cut should be good news because it would save money for most businesses, while a corporate income tax cut only benefits those making money.

Also, Magnus said, small businesses and farmers would benefit by a provision that increases the value of property not taxed by estate taxes after an owner's death.

Bakk said several provisions in the Senate bill would hurt the Iron Range. Included are reductions of "payments in lieu of taxes" that several entities pay to local governments for property that is not subject to property taxes.

There are enough cuts that the Iron Range Rehabilitation and Resources Board would lose its funding, the senator said.

Also in the Senate bill are provisions to:

- Negotiate with Wisconsin a restoration of "tax reciprocity," which until this year had allowed residents of one state who work in the other to file just one income tax return.

- Allow some cities, including Fergus Falls and Hutchinson, to impose local sales taxes.

- Reduce the state renters' property tax credit.

- Eliminate of a sustainable forest initiative that provided funds to preserve forests.

- Reduce and eventually eliminate payments to some northwestern Minnesota communities to help them compensate for being near low-tax North Dakota.

Don Davis works for Forum Communications Co., which owns the Bemidji Pioneer.

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Pioneer staff reports
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