Senate unexpectedly defeats tax bill

Sen. Larry Pogemiller, DFL-Minneapolis, says he brought what he thought was a good bill to the floor - but his Senate colleagues "didn't want it." The Senate defeated Pogemiller's bill on a 32-35 vote.

At the beginning of the nearly three-hour debate, Pogemiller said his bill wasn't even very exciting.

"This may be one of the least controversial bills you'll see this session," Pogemiller told his colleagues.

Despite that pitch, a majority of senators disagreed.

Pogemiller says his bill would provide nearly $400 million in property tax relief for homeowners by increasing state aid to schools, cities and counties. Pogemiller says homeowners have seen double-digit property tax increases in recent years, while commercial-industrial rates have barely risen.

To pay for some of the additional local government aid, Pogemiller's plan relies on a revenue source he's advocated for several years -- closing what he calls corporate tax loopholes, by taxing the income of Minnesota companies that do business overseas. He also wants to increase the amount the state collects from a statewide business property tax as business property values rise.

"It doesn't raise taxes," Pogemiller insisted. "What it says is, as there's valuation increase, you get to capture the valuation increase to pay for schools. I don't think that's a hard thing to ask."

Things are really going good. Why do we want to talk about anything that is increasing taxes in Minnesota?

But that was apparently too much to ask for many senators, including some of Pogemiller's DFL colleagues. Sen. Ann Rest, DFL-New Hope, says she voted against the bill because she didn't like Pogemiller's two revenue raisers.

"It seemed to me that with the amount of surplus that we had, that this was a year of giving tax relief and not of increasing taxes, and that occurred in two places in the bill," said Rest. Five other Democrats joined Rest and all Senate Republicans in voting against the bill.

Minority Leader Dick Day, R-Owatonna, argued against the bill, saying Minnesota taxes are high enough. He says state revenues are going up and businesses are expanding.

"Things are really going good. Why do we want to talk about anything that is increasing taxes in Minnesota?" Day asked.

The bill's defeat surprised many lawmakers, and created a buzz on the Senate floor, as the bill's supporters tried to figure out what to do now. The bill could be revised and brought up again, especially since it only needs two more votes to pass.

But even if the bill makes it through the Senate, its chances of becoming law seem slim. House Republicans have proposed a vastly different form of tax relief, and want to send property tax rebate checks to homeowners this fall.

House Tax Chairman Phil Krinkie, R-Lino Lakes, says the House won't go along with the Senate's approach.

"I'm totally opposed to the idea of giving money to local units of government, in hopes that someday, somewhere, perhaps they might see some minor - it wouldn't be a reduction, it would only be reducing future property tax increases potentially," said Krinkie.

Krinkie hasn't put his tax bill together yet, and is instead holding hearings on a Twins stadium proposal this week.

The Legislature doesn't have to pass a tax bill in this non-budget year, and the chances there will be no tax bill appear increasingly likely.

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