Our Opinion: Now is the time for state tax reform
Only a few days remain in this year's session of the Minnesota Legislature, and so far it appears lawmakers and Gov. Mark Dayton remain far apart on several issues.
Perhaps the most important issue is the passage of a tax bill. Without its passage, there could be a lot of confusion when Minnesotans do their taxes in 2019.
The one "must pass" bill this session is the tax bill, and we also believe the time is right to pass tax reform for the benefit of residents and businesses alike. It appears, however, the Legislature is poised to remain in a stalemate with Dayton on taxes as we enter the waning days of this session.
Republican-written legislation to simplify how Minnesotans deal with new federal tax law passed the House 78-50 Tuesday, May 15, and the Senate 34-33 Wednesday, May 16. Dayton has said he will not sign it or even negotiate with lawmakers unless they agree to a $138 million "emergency" appropriation to Minnesota schools.
The Legislature has until midnight Sunday to pass bills. That leaves little time to accomplish anything on taxes, especially a bill now held hostage unless an 11th hour compromise comes to light.
Besides matching Minnesota tax law with new federal law, the legislative plan would lower some taxes. That's an effort we support, and what better time to do it than now with the state sitting on a $329 million surplus.
Yes, the are other needs this session, and both the House and Senate passed public works bills to that effect, among other bills. And while those spending bills may be pressing, they don't quite match the urgency of the tax bill, or the benefits it could bring to Minnesotans.
Putting it nicely, Minnesota is not the most tax friendly state in the nation. We rank fourth in individual tax rates and third in corporate tax rates. We're not advocating a momentous change in tax rates that would jeopardize future state funding for projects or initiatives, but using the $329 million surplus to ease the burden on all taxpayers, even if by a little, would be a nice start. The future growth of the state, be it in business or in population, would appear to depend on it.
Also concerning is Dayton's earlier idea to reinstate the business property tax inflator. As we stated in an editorial during last year's session, it's an unwise tax on businesses on top of the taxes they already pay to school districts, cities and counties. The Legislature was right to ditch it in 2017 and it shouldn't come back.
Don't get us wrong, Dayton is right—special funding for select schools is need is an emergency. But that need should not be used to hold up a tax bill that has the potential to affect a majority of Minnesotans. Bills should be considered individually on their merits, not tacked on to other priorities or used as leverage.
There needs to be a sense of urgency on putting together a comprehensive tax bill, one that aligns the state with the recently passed federal tax bill and one that offers tax reform.
If there ever has been an easy time to work out tax reform, this would appear to be it, when the state has a surplus. Now is not the time to grandstand. It's time to compromise.