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Paynesville Press - July 25, 2001

Extra session was used for tax relief

By Michael Jacobson

This year's legislative session went to overtime before most of the work - including $1.5 billion in tax relief - got done.

"It was a long process," said Sen. Michelle Fischbach (R-Paynesville), but the outcome was good."

The tax relief included $700 million for another sales tax rebate and over $800 million in property tax relief.

"It was a fruitful special session," agreed Rep. Doug Stang (R-Cold Spring). "We would have preferred for everything to be done in May."

"If we would have given up, we could have gotten done (earlier)," he added. "With the type of tax reform we were going for, it was very difficult to get done on time."

"In my 23 years of legislative service, I have never seen a session quite like this," said Sen. Dean Johnson (DFL-Willmar). "Major changes to our tax system have been debated and passed. These changes will have a lasting impact on rural communities and matters are complicated by our three-party government."

The sales tax rebate will go to more than 2.4 million eligible taxpayers, according to the Minnesota Department of Revenue. New clauses this year should provide rebates for pensioners, property owners, and Minnesota residents who paid federal but not state taxes.

The sales rebate checks - or in some cases, the electronic fund transfers - should be done by Labor Day, according to the Minnesota Department of Revenue.

The property tax relief, costing an estimated $843 million, should reduce taxes on homesteads by 23 percent, apartments by 25 percent, farm homesteads by 25 percent, commercial and industrial by 10 percent, and cabins by 12 percent, according to the Office of the Governor.

This tax bill required an extra month to approve, and the state barely avoided a government shutdown at the start of July. The first day of July marks the start of a new biennium and fiscal year for the state, which would have been without funds without a new budget.

The property tax reform - which also includes the state assuming more of the funding for K-12 education in the state -╩should have a significant impact for agriculture. "As a state government, there's not a whole lot we can do to influence the price a farmer gets for his or her crop, but we can do something about production costs," said Minnesota Department of Agriculture Commissioner Gene Hugoson in a news release.

"This tax reform is significant because it brings Minnesota farmers' tax burden more in line with that of farmers in other states," he continued. "With this permanent tax cut, we are reducing farmers' production costs and making them more competitive when it comes time to sell their corn, beans, or other commodities."

It took extra time to pass this tax reform. "I was disappointed we did not finish on time," thought Sen. Steve Dille (R-Dassel).

"If the Governor, House, and Senate had come together earlier to start major negotiations sooner, we may have avoided a special session," said Johnson.

Rep. Al Juhnke (DFL-Willmar) said much of the impasse resulted from an unfair balance in tax cuts in some proposals that provided significant relief for corporations and luxury homes and would have shifted much of the tax burden onto modest homes and businesses in rural communities. "It also pays for this shift by reducing the amount of aid sent to rural communities. That aid is used to pay for state-mandated programs such as courts, highway maintenance, and social services," Juhnke said.

"I think the biggest obstacle was the lack of balance in budget proposals by the Governor and House Republicans," said Juhnke. "They painted themselves into a corner because they're trying to govern through slogans - "Give it all back!" and "Not on my watch!" - instead of passing a budget that meets the needs of Minnesota."

Fischbach isn't sure what could have been done to avoid a special session. "Sometimes it takes longer to make the kind of changes we did," she explained. "One possibility is requiring by law for the tax bill to be completed by a certain date."

The state has had surpluses for the past several years and utilized sales tax rebate to return money to taxpayers again. In the past year, though, the economy has faltered, with a declining stock market and company layoffs. This affects the state as well.

"The state heavily depends on sales and income taxes, which are very sensitive to the strength of the economy,"╩explained Dille. "A recession could eliminate all surpluses and require an increase in taxes or decrease in spending to balance the budget."

The tax relief this year has been called historic. Right now, it doesn't seem like it will be duplicated in the next legislative session.

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