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Senate uses reserve funds to cut business tax

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ST. PAUL -- Minnesota's Republican-controlled Senate approved business tax cuts Friday that Democratic Gov. Mark Dayton all but promises to veto.

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The highlight of the GOP tax proposal senators passed 34-26 along party lines Friday night after two and a half hours of debate is a reduction in a statewide business property tax and its eventual elimination.

The bill by Sen. Julianne Ortman, R-Chanhassen, would reduce the taxes $102 million next year. To fund the tax cut, the bill reduces state budget reserves.

"We should not have a honey pot," Ortman said. "We do not need to keep $1.2 billion in reserve."

She said that drawing down the state reserves via tax cuts is a good way to return tax money to Minnesotans.

Also in her bill, the state income tax law dealing with married couples would change to conform to federal law. She said that would save married couples $62 million in the next year.

The bill also would provide refunds to property taxpayers whose taxes rose more than $100 or 12 percent.

The longest debate of night was over a Sen. Katie Sieben, DFL-Cottage Grove, amendment proposal to eliminate what she called "loopholes" that allow some companies with foreign operations to pay lower taxes. The amendment failed 36-26.

Ortman said taxes would have risen $180 million.

Sieben called current tax breaks a "misguided policy" that could be eliminated, with money gained used to pay schools for money the state has borrowed from them.

The governor wrote to Ortman Friday that he wants property tax relief like she does. "However, I want it distributed fairly among all property taxpayers, including families, senior citizens, farmers and renters, as well as businesses."

Dayton said he cannot support the bill because it would shoot holes in the state budget by an "ever-increasing amount."

The governor gave Ortman a chart showing that in the past decade residential property taxes increased 295 percent, while business taxes rose just 57 percent.

Dayton thanked Ortman for not including a provision that is in the House bill to reduce state property tax refunds for renters.

Dayton suggested waiting to make major tax changes until Revenue Commissioner Myron Frans completes his tax system review.

Republicans said business tax cuts would help Minnesotans.

"Tax relief for businesses and job creators makes more capital available for investment, equipment, expansion and additional employees," Sen. Joe Gimse, R-Willmar, said. "This is the type of legislation, a true jobs bill, which will help to grow the private sector economy."

But Sen. Rod Skoe, DFL-Clearbook, said that draining the budget reserve is not the way to fund tax cuts.

"You have to pay for what you want to do..." Skoe said. "No more deficit spending."

A bill the House has passed also phases out the statewide business property tax, but there are several differences in the bills.

Don Davis reports for Forum Communications Co.

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