Veterans gathered in Brainerd to hear about a controversial new tax cut signed into law this spring that eliminates state income tax on their retirement pay.
Although it covered a range of veterans-related legislation, the meeting at the Skillet Restaurant on Thursday focused on the pensions exemption bill authored in the Minnesota House of Representatives by Rep. Josh Heintzeman, R-Nisswa and in the Senate by Sen. Paul Gazelka, also a Republican from Nisswa. Rep. Dale Lueck, R-Aitkin, helped host the talk.
The law takes effect for taxes paid on income earned this year.
Rep. Bob Dettmer, R-Forest Lake, chair of the Veterans Affairs Division, told veterans eating breakfast the provision did indeed pass, and shouldn't be confused with the omnibus tax bill, which Gov. Mark Dayton pocket vetoed.
However, not everyone's gung ho about the new tax cut, which even supporters describe as one of the biggest such cuts related to veterans in state history.
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In an editorial published Monday, the Star Tribune Editorial Board said the tax cut was "wasteful" and pointed out the $23 million it saves veterans in taxes for fiscal year 2017 also means $23 million less in annual revenue that would otherwise go to state government initiatives. The pension exemption wound up in a supplemental budget bill after the bipartisan tax conference committee chose not to include it in the tax bill, the editorial said.
"Tax measures usually don't appear in spending bills, for good reasons that include the state Constitution's requirement that laws 'embrace only one subject,'" it said. "Further, this massive bill did not arrive on the House floor until 7:30 p.m. on the session's final day for enacting bills."
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The board also took issue with the claim made by proponents of the bill that it would attract veterans to the state. When Wisconsin exempted its veterans' pensions from state income tax in 2001, the percentage of veterans as percentage of total state population went up only by about .06 percent by 2014.
"Is that small difference-which cannot be attributed with certainty to state tax policy alone-worth the loss of $23 million a year from the state general fund, which pays for so many of the building blocks of state prosperity?" the editorial asked. "The tax conference committee didn't think so. We don't either-and we wish legislators would not break with customary lawmaking procedures in order to bestow tax favors."
After being prompted by Heintzeman, Dettmer brought up the Star Tribune editorial on Thursday.
"How many of you get the Star Tribune paper?" he asked the veterans, who numbered about 20-25.
They scoffed.
"I don't even get (the paper)," Dettmer said.
He responded to the article's criticism by highlighting the economic benefits of the new law. Minnesota was only one of a small number of states left with a veterans' pension tax, Dettmer said. Young retired veterans, often in their 40s, can't rely on the pension for income. They inject money into the Minnesota economy with purchasing, and since they're still in a relatively early life stage they continue to have productive careers that also contribute to the state economic environment, he said.
"Millions of dollars comes into the state if we keep veterans here in Minnesota," Dettmer said.
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Interviewed after the talk, Heintzeman said he was "frustrated" by the Star Tribune editorial board's criticism. The pension exemption is the right thing to do in a moral sense, he said, and there are also pragmatic benefits. He pointed out that the pensions themselves come from the federal government, which means it's money coming from outside Minnesota into the state.
"I don't think they're really looking at the numbers," he said. "It brings in a tremendous amount of federal dollars."
Heintzeman said "hundreds of millions of dollars" would be added to the state's economy although he could not provide a specific number offhand.
Contacted Thursday, Gazelka said he was thinking of writing a rebuttal to the editorial.
"They did not have anything related to facts," he said.
Gazelka granted that the measure does drop $23 million from annual state revenue, but he added the editorial doesn't take into account the veterans that were leaving the state. In fact, the state would see a tax revenue increase from new veterans moving in, when they pay taxes on property and other income as well as sales tax, he said.
As to the editorial's charge that the bill circumvented regular legislative process, Gazelka said the tax bill and the supplemental budget bill were closely linked during negotiations, so it wasn't improper that the veterans tax cut was in a spending bill and not the tax bill.
"Much of that was negotiated together," he said.
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ZACH KAYSER may be reached at 218-855-5860 or Zach.Kayser@brainerddispatch.com . Follow him on Twitter at www.twitter.com/ZWKayser .
