House passes tax bill that raises taxes, eliminates deficit and repays schools

by T.W. Budig
ECM Capitol reporter

House Democrats buy out the $854 million school-funding shift, eliminate a lingering budget deficit and offer wide-ranging property tax relief in their tax bill.

But they also propose raising $2.6 billion in new taxes to do it.

The House on Wednesday (April 24) passed its tax bill on 69 to 64 vote after about nine hours of debate.

“This tax bill punishes success,” Rep. Jim Newberger, R-Becker, charged on the House floor.

House Tax Committee Chairwoman Ann Lenczewski, DFL-Bloomington, stands with Democratic leaders prior to Wednesday's tax debate. (Photo by T.W. Budig)
House Tax Committee Chairwoman Ann Lenczewski, DFL-Bloomington, stands with Democratic leaders prior to Wednesday’s tax debate. (Photo by T.W. Budig)

But House Democrats view the bill as making needed investments in education and elsewhere in a straightforward, gimmick-free manner.

“This bill doesn’t punish the rich. It absolutely does not,” House Tax Committee Chairwoman Ann Lenczewski, DFL-Bloomington, said.

House Democrats take a different approach than Senate Democrats in their tax bill.

While the Senate wants  to lower and expand the state sales tax, broaden the third-tier income tax from 7.85 percent to 9.4 percent, House Democrats target the top two percent of wage earners in their income tax proposal and do not include a sales tax expansion.

Instead, a temporary, four-percent income tax surcharge is placed on tax filers with taxable incomes of more than $500,000 and a fourth-tier 8.49 percent rate exacted on married filers with taxable incomes greater than $400,000.

“Cutting things hurts people too,” Lenczewski said in response to Republican critics.

House Democrats look to capturing $1.5 billion over the upcoming biennium through their income tax proposal.

Like the Senate, House Democrats propose raising cigarettes taxes — they propose a $1.60 per pack increase.

The tobacco tax hike is expected to nab an additional $430 million over the next two years.

House Republicans repeatedly slammed increasing the state tax on cigarettes to $2.83 per pack.

“It’s not a sin tax. It’s an addiction tax,” Newberger, a former smoker, said. He said he still misses smoking.

“There’s a thriving back market for cigarettes across the country,” Rep. Bob Barrett, R-Lindstrom, warned.

House Democrats want to increase the state’s alcohol tax, last raised  26 years ago, Lenczewski said,

Senate Democrats do not do this.

The so-called alcohol users’ fee, as House Democrats call it, is expected to bring in $350 million over the next two years.

But it doesn’t come close to recouping the toll alcohol exacts on the state in traffic accidents, acts of violence and health costs.

House Democrats insist the tax trickles down to about seven cents a drink.

House Democrats also look to closing perceived corporate tax “loopholes” in their bill, a move capturing an additional $310 million over the upcoming biennium.

In terms of spending, House Democrats slate $270 million in property tax relief by bringing back the Homestead tax credit — a “sham,” Republicans argue — with more a generous renters’ credit and $80 million in additional local government aid.

The House tax bill contains a reworked local government aid formula.

Other provisions include several relating to transportation.

In addition to increasing the state tax on car rentals from 6.2 to 9.2 percent, the bill provides authority for Greater Minnesota county boards, without referendum, to establish a half-cent transportation sale tax and $20 per vehicle excise tax.

All counties, under the bill, can establish a $10 wheelage tax, with a $20 wheelage tax allowed in 2018.

The only amendment that had House Democrats and Republicans voting in unison dealt with transportation.

Rep Mike Benson, R-Rochester, offered an amendment placing a fuel tax on wholesale fuel marketers.

The House needed to establish a position, Benson said.

The provision, found in the Senate transportation bill, was rejected without a single “Yes” vote cast.

In general, House Republicans monopolized debate, with few Democrats taking the floor.

Rep. Mark Uglem, R-Champlin, called the tax bill a drag on an otherwise recovering economy.

“It’s been said money talks; but money walks, also,” he said of people fleeing the state because of taxes.

“One thing you can see from my district is Wisconsin,” Rep. Kathy Lohmer, R-Stillwater, said.

Rep. Pat Garofalo, R-Farmington, spoke of a massive tax increase and Democrats becoming “unhinged.”

Rep. Kurt Zellers, R-Maple Grove, lampooned the idea of wealthier people being “asked” to contribute to fair share.

No one is being “asked,” he said.

Rep. Greg Davids, R-Preston, House Tax Committee lead Republican, disputed that the tax bill affected only the wealthy.

“If you’re the poorest of the poor, or the richest of the rich, you get hammered by this tax bill,” Davids said.

Rep. Jenifer Loon, R-Eden Prairie, said House Democratic tax bill taxes just about everything. (Photo by T.W. Budig)
Rep. Jenifer Loon, R-Eden Prairie, said House Democratic tax bill taxes just about everything. (Photo by T.W. Budig)

Rep. Jenifer Loon, R-Eden Prairie, said Democrats were raising $2.6 billion to deal with a $1.4 billion problem.

“There’s a tax increase in here for about everything,” Loon said.

“Beer, baseball cards, and the list goes on and on,” she said.

But House Majority Leader Erin Murphy, DFL-St. Paul, said protecting the status quo isn’t offering a plan.

Lenczewski chided Republicans for using words like “pig” and other superlatives in describing the tax bill.

“It’s frustrating to me,” said Lenczewski, who avoids incendiary language.

“Democrats do it, too,” she said.

Rep. Yvonne Selcer, DFL-Minnetonka, voted against the tax bill.

Tim Budig can be reached at [email protected].

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