"Even after last year's tax cut, the state generated another $1.8 million surplus, our eighth consecutive," said Sen. Michelle Fischbach (R-Paynesville) in a press release.
The Legislature used the one-time surplus, the part generated this year by the strong economy, for a transportation bill and to fund the tax rebate, according to Rep. Al Juhnke (DFL-Willmar). At least $400 million will go for transportation and $600 for the tax rebate.
The tax rebate this year will be based on a similar format as last year. The total rebate, though, will be half of last year's. The rebate will be based on 1998 tax returns. Juhnke said small changes in the format should help the rebate reach people without income who were excluded last year, such as retirees and students.
People can file tax returns retroactively to qualify for the rebate. The revenue department should issue the rebate checks in late July or early August, according to Sen. Dean Johnson (DFL-Willmar).
An agreement on what to do with the permanent surplus proved elusive. Some legislators wanted the money returned directly to taxpayers, while others wanted to spend the money on needed programs in the state.
In the end, the Legislature and Gov. Jesse Ventura agreed to a split, whereby the House would spend one third, the Senate one third, and the governor one third.
Fischbach said the compromise was unprecedented in that it made the governor an equal partner in appropriations. Rep. Doug Stang (R-Cold Spring) also questioned the wisdom of giving the governor greater authority in spending.
The Senate spent its third on education, nursing home wages, and the environment, according to Juhnke.
The House used its share on a income tax cut. Both Stang and Fischbach wished the tax cuts would have been deeper, and new spending reduced. "Because these surpluses are primarily created by income taxes, they demonstrate that income taxes in Minnesota are still too high," explained Fischbach.
Stang said a more substantial tax cut would have been possible if the various branches would have worked together, instead of in isolation. He said a state survey indicated the public's desire for tax cuts and license tab fee reductions as the top priorities.
Juhnke, though, wanted to spend more, not less. He hears from people who figured the money was paid in so they wouldn't miss it. "We've got things that rural Minnesota really needs like roads, and schools, and telecommunications,"Êhe explained.
Besides, he figures the tax cut will mean an extra 25¢ a week for people with a $20,000 yearly income. Juhnke thinks rural Minnesotans would have benefitted more from sales or property tax relief.
Sen. Steve Dille (R-Dassel) felt the compromise struck a balance between the two sides, one wanting all the excess tax money back and the other wanting to spend it wisely. "Part of our job is to compromise," he said.
Fischbach agreed, saying, "I think what we did works. We could not leave without doing something."
Governor Ventura used his third to cut license tab fees. Under his plan, car owners will pay the full tab price for the first year. But in the second year, the cost will be capped at $189. In years three through ten, the cost is capped at $99. The lowest rate stays at $35.
Fischbach has worked at the capitol for license tab reform since 1997. Back then, she said, she couldn't get a single vote in committee on license tab reductions.
So she is pleased that reductions have been made, but she would have liked more. She especially would have liked more at the lower end, with the lowest rate being reduced.
"The problem with Jesse's plan is it only saves money on expensive cars," Fischbach explained.
Instead of capping the high end, Fischbach advocates an across the board reduction, by say 10 percent.
Farmers can expect some additional tax relief through the expansion of the agricultural homestead property tax credits. This year's tax bill designated an additional $11.5 million for these tax credits.
According to Rep. Bob Ness (R-Dassel), the plan increases the tax credit from 54 to 70 percent for homesteaded land with a market value less than $600,000. Non-homesteaded property will see an increase from 50 to 63 percent, he added.
"Expanding property tax relief is important for our farmers," said Ness. "That's why we have worked so hard to deliver the largest property tax relief package in Minnesota history this biennium. Between the two years, we have permanently cut ag property taxes by...$64.1 million."
Questions about the rebate and eligibility for it can be directed to the Minnesota Department of Revenue. During regular business hours, call 1-800-652-9094. Hearing- and speech-impaired persons using a TTY machine can call 1-651-297-2196.
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