House GOP proposes tax, LGA cuts
Minnesota income taxes would fall $300 million in the next two years under a House Republican plan, while state payments to local governments drop significantly.
The proposal eliminates Local Government Aid for Duluth, Minneapolis and St. Paul, as well as Twin Cities suburbs, by 2015. It also lowers money paid to counties as well as other programs that help fund local governments.
"We did a very effective job of looking at where there could be savings," said Chairwoman Linda Runbeck, R-Circle Pines, of the House property and local tax division.
All taxpayers would pay lower taxes, which did not sit well with Democrat Gov. Mark Dayton, who wants to raise taxes on the rich.
Dayton's Revenue Department estimates that a Minnesotan earning $50,000 annually would save $53, while someone earning $500,000 or more would save $176. The governor said Republicans reward the rich more than middle-income Minnesotans.
Runbeck and House Tax Chairman Greg Davids, R-Preston, said the GOP plan is a start and up for negotiations. Davids said he does not expect Dayton to sign the bill if the House and Senate send one like the committee is discussing this week.
City leaders were not happy with local aid cuts.
"We are pleased that the proposal recognizes the importance of (Local Government Aid) LGA to homeowners and businesses in greater Minnesota," Park Rapids Mayor Nancy Carroll said. "However, we strongly disagree with the exclusion of metro and suburban communities from a policy that has benefited the entire state."
As president of the Coalition of Greater Minnesota Cities, Carroll ran a meeting last week with city officials and Dayton in which small and large cities pledged to stick together on seeking continued state aid.
"It's kinda scary," Rep. Kerry Gauthier, DFL-Duluth, said about eliminating his city's state aid by 2015.
As a regional center, he said, Duluth serves people from a wide area who visit for education, business, recreation and other reasons.
"It isn't just Duluthians using Duluth services," Gauthier said.
Runbeck plans further work in her committee Wednesday.
"We will learn more about Duluth and what their needs are," she said.
LGA was established to help cities that do not have enough taxable property to provide fundamental services. Republicans say large cities can raise enough property tax to support their needs.
Under the GOP bill, cities that still receive LGA would not be able to raise property taxes.
Suburban cities receive relatively little LGA.
Rep. Paul Marquart, DFL-Dilworth, said rural cities could be hurt even though they would get the same aid as in the current budget.
"You're losing your political support," he said.
With 75 percent of Minnesotans not in communities with LGA, there eventually will be little political reason for the state to keep sending aid to rural communities, Marquart said.
Senate leaders on Monday refused to say how similar their tax bill may be to the House plan. Their plan is due in the next few days.
Dayton said that since Monday was the half-way point of the 2011 legislative session, there is plenty of time to work out a compromise. Still, in a news conference and in letters to legislative Republican leaders he said their $34 billion, two-year budget plan would force "very drastic" cuts in state programs.
The governor said his agencies tell him that budget cuts like Republicans want could lead to situations as varied as eliminating meat inspections to closing seven parks, from lowering health-care payments for the poor to inspecting banks less often.