Minn. Senate approves tax boost to pay for transportation work

Democrats in the Minnesota Senate on Monday passed a transportation bill that relies on tax increases to pay for road, bridge and transit projects. The final vote was 36-27.

State Sens. Dan Sparks, DFL-Austin, and John Hoffman, DFL-Champlin, joined Republicans in voting against the bill.

The Senate bill would increase the tax on gasoline to pay for road and bridge projects and add a Twin Cities metro area sales tax to pay for transit.

State Sen. Scott Dibble, DFL-Minneapolis, said the increased transportation funding is needed to pay for ongoing maintenance and new projects.

"More than half of Minnesota's roads are more than 50 years old," Dibble said. "Forty percent of the state's bridges are more than 40 years old. And in just the next three years alone, one in five Minnesota roads will pass their useful life."

House Republicans have proposed a transportation bill that relies on borrowing and dedicating sales taxes on auto parts, leased vehicles and rental cars to pay for road and bridge projects.

Senate Republicans objected to the Democrats' bill on the grounds that transportation taxes would hit lower income Minnesotans the hardest.

"Those folks who are trying to get to school or their first job or there are folks who are unemployed who are trying to pay for that tank of gas to get to that job interview," said State Sen. Julianne Ortman, R-Chanhassen. "This is going to hit the poorest of the poor."

Before the Legislature passes a transportation bill, Senate Democrats and House Republicans will have to negotiate to reconcile their differences.

The other debate that underscored differences between the two parties deals with tax policy. The Senate tax bill provides about a tenth of the direct tax relief proposed by House Republicans.

While House Republicans have proposed a $2 billion tax cut for individuals and businesses, the Senate plan aims to keep local property taxes down and provide a variety of tax credits. Some of the credits would encourage people to save for college and to create housing in areas of the state where there are more workers than places to live.

Senate Tax Committee Chair Rod Skoe said the bill also would give business owners a credit of $2,500 for every veteran they hire. Skoe said that would help veterans returning from Iraq and Afghanistan.

"There are housing issues, there are mental health issues and we really think the best way to get at those is to help those young men and women get a job when they come back," said Skoe, DFL-Clearbrook. "So we put a very significant credit in place to try to assist those folks."

Skoe said farmers and homeowners who see a sudden spike in property taxes would be helped by the Senate plan, which he said would cut the statewide business property tax.

The Senate bill also would increase state aid to cities and counties, which Republicans oppose. Democrats also would raise property taxes for railroads to offset the cost of grade crossing improvements.

"We think it's really important to have a strong partnership with our local units," Skoe said. "You know, we ask them to provide a lot of services to Minnesotans and we want to be partners."

The plan does not include a proposal by Gov. Mark Dayton to increase the tax credit for child care.

The $2 billion Republican tax cut includes a temporary personal income tax exemption and cuts to the statewide business property tax. It also cuts taxes on veteran retirement benefits and Social Security income.

State Rep. Greg Davids, Chair of the House Tax Committee, said he believes he and Skoe can reach a deal in the three weeks that remain in the session.

"I know that we're not going to be doing $2 billion and he knows he's not going be doing $200 million," said Davids, R-Preston. "Somewhere in between there we'll find the sweet spot and we'll put the tax bill together."

The House is scheduled to vote on its tax bill on Wednesday.