MPR: GOP Tries to Avoid Tax Showdown

GOP Tries to Avoid Tax Showdown
by Martin Kaste
January 12, 2000

At A Glance

Highlights of the GOP Tax Plan

Lowers middle income tax rate three-fourths of a percent to 7.25 percent, drops top and bottom rates a half-percentage point to 8 percent and 5.5 percent respectively.

Costs $1.35 billion through the current budget cycle, and $1.6 billion in the following two years.

Cuts taxes on corporate income.

Provides relief for agricultural land, and business and apartment properties.

Allows taxpayers to deduct their health premium costs.

House Republicans are promising another round of tax cuts similar to the ones passed last year, including another tax rebate later in the year. In the past, Governor Ventura has said he's planning a major reform of the state tax system for next year, but Republicans say the mounting state budget surpluses make it imperative to cut tax rates as soon as possible.

DURING THE LEGISLATIVE DEBATE over income tax cuts last year, Republicans took a lot of hits for supposedly favoring the wealthiest Minnesotans. DFLers complained loudly about how most of the savings in the Republican proposals seemed to go to the upper income-bracket; a criticism occasionally echoed by Governor Ventura. This time around, Republican Speaker Steve Sviggum is doing his best to avoid that criticism.

Sviggum: The lunch bucket tax cut.

Sviggum and other Republican leaders announced their new tax plan with the bluest-collar symbols they could think of.

Sviggum: When people get up in the morning, and they go to work, they have certain things in their lunch buckets. They got the sandwich. The bread and the butter. The bread-and-butter tax cut of the Republican plan is going to be a tax cut - a half, three quarter, and a half. Another income tax reduction that the citizens of the state of Minnesota, that the working people of Minnesota, the moms and dads, ought to expect.

Sviggum proposes cutting the tax rate on the lowest and highest income brackets by a half-percentage point, and three-quarters of a point on the middle bracket. For a married couple filing jointly, the "middle bracket" is defined as taxable income between about $26,000 and $102,000. Under the Republican plan, a family with two kids with an adjusted gross income of $50,000 would save about 10 percent on its state income tax bill.

Critics on the left say those numbers are deceptive, because they don't use pre-tax income figures. Wayne Cox of the labor union-aligned Minnesota Citizens for Tax Justice says he's calculated that most of the relief will go to families with real incomes of $50,000 and above.

Still, the basic formula for the Republican income tax cuts is a repeat of what the Legislature approved last year after cliff-hanger negotiations between the House, Senate and governor. The fact the Republicans are opening this year's negotiations with a similar deal indicates they're in less of a mood for confrontation this year; House Majority Leader Tim Pawlenty says this time around, Republicans have run their plan by the governor in advance.

Pawlenty: He has indicated that he likes most aspects of this plan. Now, we're going to disagree over the size of it, but as to the contents of it, the concepts included in it, he has reacted at least on a preliminary basis favorably. So we're not trying to project any kind of discord with the governor, I think actually we're going to be more in harmony with him on these issues than we were last year.

"You're taking all the resources off the table, there will be nothing there for education, nothing for investing in telecommunications, nothing for health care."

- Roger Moe

Ventura spokesman John Wodele says the governor hasn't seen the complete GOP tax plan, and won't endorse it or reject it yet. But Wodele says Ventura is open to income tax cuts this year in principle.

House Republicans will have more of a fight on their hands with the DFL Majority Leader of the Minnesota Senate, Roger Moe. Moe says some tax cuts are likely, but nothing as deep as what Republicans want.

Moe: Last year we reduced income taxes, based on the previous year, over 18 percent, and I think it's reckless, very reckless, to get into that stage, because, again, you're taking all the resources off the table, there will be nothing there for education, nothing for investing in telecommunications, nothing for health care.

Moe has seen himself in the last few years as the only brake on what he considers Republican tax-cutting excesses. That role has become harder as state budget surpluses continue to pile up even after a succession of tax cuts. Moe's traditional argument has been that cutting taxes too deeply during the good times will set up a disastrous deficits as soon as the economy cools down. But Republicans, such as House Tax Committee Chairman Ron Abrams say after 15 consecutive budget surplus predictions, that argument no longer works.

Abrams: Fool me 15 times, shame on you. Fool me 16 times, shame on me.

The total value of the Republican tax cut proposal for the first two years is $1.35 billion, which includes a $500 million tax rebate later this year and reductions in property tax rates for commercial property, apartments and farm land. Republicans have yet to spell out the details on many of those tax cuts.

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