ST. PAUL, Minn. (AP) — Gov. Mark Dayton on Friday proposed repealing several GOP-backed tax breaks that he signed into law last year and sending more money back to Minnesota families, setting up an inevitable clash with the Republican-controlled Legislature as it works to synchronize Minnesota's tax code with the new federal cuts.
Dayton's budget proposal would also boost funding for preschool programs, pay for school security enhancements and reinstate a $2 fee on driver's licenses and other vehicle transactions. But after the federal government's new tax cuts passed last year, the central focus of this year's legislative session is on taxes.
State policymakers face the daunting task of syncing the state's tax code with the new federal one without hitting families that have multiple children and some businesses with an incidental tax increase — pulling in $500 million in additional revenues. Dayton's plan would redirect that money largely to individuals and families, giving 2 million families an average tax credit of $117 while leaving some businesses with a higher tax burden.
"Individual Minnesotans have not received much, if any, benefit from the federal tax bill," Dayton said. "This is a way of balancing it out."
But Dayton also revived an old feud by targeting recent state tax breaks on tobacco products, business property taxes and wealthy estates. Dayton signed those measures as part of a $46 billion budget last year but tried to force GOP lawmakers to rework them by vetoing the Legislature's operating budget. The ensuing legal battle raged for months before the Minnesota Supreme Court upheld Dayton's veto in November.
Repealing those tax cuts would enable Dayton to make the government spending increases he deemed critical while leaving $123 million to spare, "thus preserving the structural surpluses and the budget integrity which I have said are so vitally important."
All told, Dayton's budget would raise an additional $250 million over next three years in taxes and fees, like a new $9 per household charge to fund water quality initiatives and a new $7,750 registration fee for assisted living centers to improve senior care oversight. Republicans said the Democratic governor's budget proposal fell far short.
"The truth is, he's proposing a significant tax increase for many families, completely wiping out any savings they may have been entitled to after federal tax reform," said Sen. Roger Chamberlain, the Senate's Tax Committee chairman.
The Legislature hasn't yet begun assembling its own plan to conform Minnesota's tax code with the federal government. Senate Majority Leader Paul Gazelka indicated he'd seek to equally protect both individuals and businesses from tax hikes, while not ruling out using part of the state's current $329 million budget surplus to go even farther with tax breaks.
Dayton defended the need to renew a $2 fee on driver's license applications, titles and other vehicle transactions as the only way to pay for needed fixes to MNLARS, the new computer system that has struggled since its summer rollout. Launched years late and well over budget, the $43 million in extra funding state information technology officials say they need brings its total tab to nearly triple original projections.
Republicans immediately shot down that request.
"This proposal is dead-on-arrival in the Minnesota House, and we will not force Minnesotans to pay more to clean up the Governor's DMV mess," Rep. Paul Torkelson said.
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