Dayton, House DFLers want to repeal $600M in taxes

Gov. Mark Dayton and Democrats in the Minnesota House plan to repeal several taxes that were enacted under their leadership less than a year ago.

In 2013, Dayton signed a tax bill into law that raised taxes by $2.1 billion over two years. This year, Dayton wants to repeal three business related taxes that deal with warehousing, telecommunications purchases and business equipment repair. During a conference call with reporters, the governor also said he wants the state's tax code to conform with federal tax changes passed by Congress last year.

The tax cut talk came as Minnesota lawmakers kicked off the 2014 legislative session on Tuesday. But although Dayton and House Democrats say there is an urgent need to repeal the $600 million in taxes, DFL leaders in the Senate are reluctant to embrace the plan.

Dayton, however, emphasized that he only agreed to the business taxes as part of a budget compromise with Senate Democrats last May to balance the state's books. Given that the state has an $825 million surplus, Dayton and House DFLers are pushing to repeal the taxes before they kick in.

The governor said he'd like to see the Legislature at least pass a federal conformity bill and repeal the tax on warehousing services by mid March. He said that would make life a lot easier for Minnesotans who are in the midst of filing their income taxes or will have to start paying the warehouse tax.

"In both of these cases, I'm encouraging the Legislature to act very quickly, and at the latest by March 14, so the Department of Revenue can incorporate those changes into its tax policies," he said.

On Tuesday, the House Tax Committee spent most of the afternoon hearing bills that would change the tax code. House Speaker Paul Thissen said the changes are a priority for the House.

"We want to move though as quickly as we can on some of those very time sensitive tax issues," said Thissen, DFL-Minneapolis. "So federal conformity is going to affect in some ways people that are filing their taxes right now. So we want to make sure that we get the laws passed so people can take advantage of those tax reductions yet this year."

Republican leaders appear on board with the push to cut taxes, but they also say there's some irony that Democrats are pushing to repeal many of the taxes they enacted just last year.

House Minority Leader Kurt Daudt said the timing of the tax talk is suspicious considering Dayton and the House are up for re-election in November.

"In a non-election year, Democrats were acting like Democrats, raising every tax that they could think of," said Daudt, R-Crown. "And in an election year, we'll see if they act more like Republicans or if they continue to act like the tax raisers that they have."

Dayton didn't mince words when discussing how this part of his agenda might help his chances of re-election in November.

"In most cases, tax reductions have been beneficial to the political standing of office holders," he said. "I'm not going to deny that."

Senate Minority Leader David Hann, R-Eden Prairie, said his caucus is on board with the tax cuts.

The only obstacle appears to be Senate Democrats.

Senate Majority Leader Tom Bakk says he's reluctant to pass the menu of tax cuts Dayton and House Democrats want. Bakk said he wants to make sure the state has the money over the long-term to afford the cuts — including the conformity that links state tax law to federal law.

"I believe full conformity is in the neighborhood of $200 million a year so that would be about $400 million in the next biennium," said Bakk, DFL-Cook. "I think we have got to make sure that we have the money after the forecast so we can live up to that commitment. I don't want to do conformity only for one or two tax filing years."

Bakk said he's reluctant to comment on which tax cuts his caucus may support until the budget forecast is released on Friday.