Republicans who control the state Senate unveiled a bill Wednesday that they said will cut taxes for half of all Minnesota taxpayers while having no net impact on the budget, in keeping with their firm opposition to higher taxes.
They staked out a position far apart from Democratic Gov. Tim Walz and the Democratic majority in the House, who want to raise gasoline and other taxes and preserve an expiring tax on health care providers. While contentious negotiations lie ahead, both sides and the governor continue to express optimism that they can pass a balanced budget by the May 20 adjournment deadline.
“Certainly we’re far apart, but it’s my job to make the case that the resources we have is what we need to live within,” Senate Majority Leader Paul Gazelka told reporters. “We’re already a high tax state … and so I’ll make the case that we have enough resources if we just use them wisely.”
Senate Taxes Committee Chairman Roger Chamberlain called the Democrats’ tax proposals “destructive,” saying they would throw a “wet blanket” on the economy that would drive away jobs.
The GOP bill includes a quarter-point income tax cut for middle-class taxpayers — those who earn between $38,771 and $154,020 for married joint filers or between $26,521 and $87,110 for single filers. It would reduce the rate in their bracket from the current 7.05% to 6.8% for 2019. It would also let taxpayers shelter more social security income, and expand the ability of businesses and farmers to deduct equipment purchases.
Chamberlain said his bill would have no net impact on the state’s general fund, adding that it contains $800 million in tax relief for the upcoming two-year budget, including $350 million from the income tax cut. He said the cuts would be offset by more revenue that will flow in from bringing the state’s tax code into conformity with the 2017 federal tax overhaul, which eliminated or reduced many deductions.
The competing House Democratic tax bill, released earlier, would raise an extra $1.2 billion, largely by going after corporate tax havens overseas. The money would go to education and larger tax cuts for individuals, about a 7% cut for a median income household. It also achieves conformity with the federal tax code.
The gas tax hike to pay for roads and bridges is in a separate bill.
The Senate’s top Democrat, Minority Leader Tom Bakk, said he was disappointed that the GOP bill doesn’t increase aid to local governments and counties, as Walz and House Democrats have proposed, so he’s advocate pretty hard” to include it.
Chamberlain said Republicans wanted to use that money for tax relief rather than spending.
A new wrinkle emerged late Tuesday when the Department of Revenue released an analysis of the governor’s budget showing that the burdens of his proposed tax increases would fall hardest on lower and middle-income Minnesotans making less than $45,000. The report said the regressive proposals include raising the gas tax by 20 cents per gallon, or 70%, and raising motor vehicle registration fees.
Chamberlain said the report shows the governor’s proposal is a “bad deal” compared with the Republican plan.
But Walz’s spokesman, Teddy Tschann, defended the governor’s budget as good overall for lower and middle-income taxpayers.
“Minnesotans agree that every child deserves a high-quality education, that we need to lower the cost of health care, and that we need to fix our crumbling roads and bridges,” Tschann said. “Governor Walz proposed a budget to improve the lives of Minnesotans and explained exactly how he’ll pay for it. It’s time for Minnesota Republicans to do the same.”