House tax bill most notable for what’s not in it

Posted May 13, 2005
By Steve Sviggum, StarTribune

The Minnesota House of Representatives passed an omnibus tax bill that provides tax breaks for the middle class and further protects the pocketbooks of Minnesota families. It also extends tax benefits to our military members and provides regulatory relief so businesses are not penalized for creating jobs here in Minnesota.

But perhaps the most significant item of the tax bill is what’s not in it: a tax increase.

While the Senate DFL acts on increasing taxes – a whopping $1.4 billion tax increase on income and jobs — the House legislation makes needed adjustments to bring more balance, fairness and simplicity to our tax system. It does not, however, raise taxes.

While most Minnesotans support a balanced approach to solving Minnesota’s budget, that is exactly what the governor’s and House Republicans’ plan to do. The Republican House budget increases spending by $2 billion – an 8 percent increase. It’s a balanced approach and it ought to be enough.

If I could, I’d ask Minnesotans this basic question: How high should state taxes climb to provide reasonable spending increases for state-funded programs? What would be fair? What would be moral? Two percent? Four percent? More? Do you know that over the next biennium, overall tax collections to the state are projected to grow by 8 percent? Eight percent! And income tax collections alone will climb by 13 percent.

Based on those projected higher tax collections, the Minnesota House set a prudent budget that spends almost $2 billion more than in the prior biennium. Those higher tax collections reflect a wider, albeit slower growing, state economy.

It’s unconscionable to me that Senate DLFers would want to increase tax rates when so much more money if flowing to the state treasury. The net effect would not only be more state spending but also an end to job growth.

Minnesota’s hard-working families deserve better.

Under the House tax bill, changes are made to enable families to hold onto more of their paychecks.

For example, a half million married filers would benefit by conforming Minnesota’s laws to the federal joint standard deductions – a $56 million benefit. Under the House bill fewer middle-income taxpayers will be ensnared by the costly Alternative Minimum Tax (AMT).

Families will be able to claim tax savings for the investments they make in long-term care insurance, life insurance and Health Savings Accounts (HSAs). And the bill fixes the marriage penalty by allowing low-income single filers who receive the dependent care credit and working family credit to avoid penalties when they marry.

The House tax bill has an eye on kids, too. The bill repeals a cap on the K-12 education credit, allowing many low and middle-income families to invest more in their children’s education. This is funded by a repeal of the Political Contribution Refund, ending a subsidy for politicians and better using that money for children. And their teachers benefit with an extension of a deduction for the purchase of classroom materials.

The broad-based bill also helps senior citizens keep a little more of their money by exempting all medicine from the sales tax. It also broadens the senior deferred property tax program, providing added relief for senior facing rising property taxes.

The tax bill also recognizes the sacrifice made by veterans and active duty service members.

Minnesota’s National Guard members’ in-state income would be tax-exempt under our bill, and there are new deductions for military members’ families – including larger income exclusion for death benefits – that allow them to keep more of what they earn. And all Minnesota taxpayers can help our National Guard families through an income tax check-off that would allow money to be sent to them as a result of a financial hardship arising from being called to active duty.

The House tax bill acknowledges that businesses create jobs. The bill makes changes that make it more affordable to do business in the state, such as an upfront sales tax exemption for capital equipment purchases. A needed change in single sales apportionment law encourages companies to make their headquarters and create jobs here in Minnesota. And allowing individual to deduct contributions to Health Savings Accounts will spur lower health benefit costs for employers and their employees.

While there will undoubtedly be debate over these and other provisions in the bill – including changes in the Local Government Aid (LGA) formula and local option sales taxes – at its core, the House tax bill is about Minnesota taxpayers.

I believe most would agree that 8 percent is more than a reasonable increase in state revenue, and that hiking income tax rates and making Minnesota No. 1 in the nation in taxes is poor tax policy. I believe most would agree that what they want is more value for the dollars they already pay.

Steve Sviggum, R-Kenyon, is speaker of the Minnesota House of Representatives.

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