Last week, Governor Dayton vetoed House File 2337, the omnibus tax bill. But that doesn’t mean the tax discussion is over for this session.
Two other tax bills are moving through the Legislature today.
- House File 247 is in many ways a scaled-back version of House File 2337. It was passed by a tax conference committee this morning, and it’s expected to move to a floor vote soon.
- House File 2690, which is largely a technical bill, had some provisions based on House File 2337 added to it last night in the Senate, and is being debated in the House this afternoon.
This blog takes a look at the first of these, House File 247.
Last week, I noted that any tax bill should be paid for fairly, be realistic about its expected economic impact, and should not put our future prosperity at risk. The cost of House File 247′s tax cuts in the next biennium is less than in House File 2337. But it still creates a $73 million hole in the next biennium’s budget – and this bill does not identify which revenue increases or cuts in services would be used to fill in that hole. Without that information, it’s hard to know whether the trade-offs are worth it.
House File 247 includes $46 million in tax cuts and economic development spending in the FY 2012-13 budget cycle, and $73 million in FY 2014-15. The bill is modeled on House File 2337, but many provisions have been scaled back. In particular, the bill no longer includes phased-in tax cuts whose costs grow over time.
In this budget cycle, $28 million of the cost is covered by drawing on the state’s budget reserve. The other $18 million is not specified in the bill, but is described as being covered by savings elsewhere in the budget.
Some of the bill’s major provisions include:
- The statewide property tax paid by businesses and cabins is frozen for one year, instead of being adjusted for inflation. This is a $10 million tax cut in FY 2012-13 and a $37 million cut in FY 2014-15. (Previous tax proposals phased it out completely.)
- Small businesses that buy capital equipment will receive their sales tax exemption at the time of purchase, instead of having to apply for a refund. ($13 million in both FY 2012-13 and FY 2014-15.)
- The Research & Development tax credit for businesses with certain R&D expenses is increased by $4 million in FY 2012-13 and $6 million in FY 2014-15.
- The Angel Investor Tax Credit for those who invest in certain start-up businesses is increased by $4.5 million in FY 2013 only.
- The targeted property tax refund for homeowners is increased by $2 million in FY 2014-15. This refund is available to homeowners of any income whose property taxes increase by 12 percent and at least $100 over the previous year. (The provision in this bill applies to refunds starting in 2013. An increase in the targeted property tax refund in 2012 is in House File 2690.)
- There is $3 million in FY 2014-15 in tax credits for businesses that hire veterans.
- The bill includes a number of other economic development provisions, including $6 million in tax incentives in FY 2014-15 for a data center project, $7 million for the Minnesota Investment Fund in FY 2013, and $1 million in FY 2012-13 and $2 million in FY 2014-15 for a Greater Minnesota internship grants program, as well as a range of local tax incentives for economic development projects.
(The spreadsheet for this bill is handy for comparing House File 247 to House File 2337, and original positions by the Governor, House and Senate).
The bill may not receive Governor Dayton’s signature, as it still draws upon the state’s budget reserve and adds to future deficits, two things that he has opposed throughout the legislative session.
-Nan Madden
