Minnesota taxpayers will see over $1 billion in property tax rebates and relief in the coming year under the Omnibus Tax Bill approved on Thursday, the final day of the 1998 legislative session.
Senator Steve Dille, R-Dassel, said Republican legislators stood firm in their insistence on a billion-dollar tax cut, and prevailed.
"Republican members of the Senate took a stand for a billion dollar tax cut and with the help of the House and the governor, we reached that goal," Dille said. "The real winners are the taxpayers who will not only receive another property tax rebate, but will have a permanent reduction in their property taxes as well."
Dille said the legislation also phases out the sales tax on new farm machinery. The tax will be cut from 2.5 to two percent on June 30 and cut again to one percent on June 30, 1999. The tax will be eliminated completely on June 30, 2000.
The $500 million property tax rebate for 1999 will be administered in the same way as this year's rebate, except this time the maximum rebate will be capped at $1,500. When filling their taxes in 1999, taxpayers can receive up to 20 percent of property taxes paid in 1998, which can be claimed when filing 1998 income tax returns in the spring of 1999. The rebate will be about $350 for a home with a taxable value of $100,000. For farm homesteads, the rebate will be based on the taxes paid on the house, garage, and up to 320 acres of farm land. Rented homestead farm land will also qualify for the rebate.
Dille said the most significant component of the legislation is permanent property tax reform. All classifications of property will see a permanent reduction in rates, with the exception of homestead resort property and homes valued under $75,000 which will be held constant at one percent.
Property taxpayers will also see greater relief in the form of an increase in the Education Homestead Credit. Funding for the credit will be increased almost $272 million for the coming biennium, which will increase the credit percentage from 32 percent to 68 percent for taxes payable in 1999, with a maximum amount increased from $225 to $320.
"This is the largest tax cut and rebate package approved by the Legislature since the mid-1980s."
Representative Doug Stang, R-Cold Spring, said he voted against the tax bill because it doesn't return more of the states $1.9 billion surplus back to taxpayers in permanent income tax cuts. In addition, while the bill does commit the first $200 million of any projected budget surplus in November 1998 for permanent tax reductions, the next $400 million would be used to pay for capital projects approved in this year’s bonding bill.
Stang added that $400 million was earmarked to give commercial and businesses a tax break. "Even with the tax break, Minnesota still ranks number one in the nation with higher taxes," he said.
"Despite more than $4 billion in surplus revenue over the last two years, the DFL majority returns less than half of it back to taxpayers," Stang said. "Worse, they freeze $400 million of future surplus dollars to pay for pork in this year’s bonding bill. It’s unfair to Minnesota taxpayers and it’s just plain bad policy."
Stang added that in the end House Democrats returned even less of surplus back to families than they themselves had promised. They proposed a $750 million rebate and cut it to $500 million.
"If it weren’t for the pressure applied by House Republicans, there would have been no money to return to taxpayers. The DFL spending spree would have been even more out of control than it was," Rep. Stang said. "I supported many of the property tax reforms in the bill, including the rate reductions for apartments, business and farm property. But the tax relief isn’t as much or as permanent as I would have liked nor as much as taxpayers deserved."
Stang and Senator Michelle Fischbach, R-Paynesville, agreed the bonding bill and the surplus were big issues this session. They both voted against the bonding bill. "Out state projects received only small amounts in comparison to what the metro area received. There were 10 small cities who received grants for pools," Fischbach said. She added the bonding bill needed 41 votes to pass and it passed 46 to 23 in the Senate.
Stang said the light rail transit system will lead the way to similar systems connecting other areas of the state to the Twin Cities. "The Twin Cities is one of the largest metro areas in the country without a light rail transit system," he added. "I had many calls supportive of the proposal. Down the road, it will save the state some money. The state will receive $200 million in federal dollars for the project and there are indications there is more money available for future corridors."
"As one legislator stated about this session, 'We were finding solutions to problems that aren't there,'" Fischbach said. "A lot of the bills introduced were ridiculous."
Both Stang and Fischbach were glad some of the surplus was returned to the taxpayers and that schools will receive additional funding next year.
However, they were disappointed that there weren't more permanent tax cuts considering the state's surplus.