Story originally printed in the Winona Daily News or online at www.winonadailynews.com
Published - Tuesday, April 24, 2007
House faces choice: Property tax cuts vs. income tax bump
ST. PAUL — Leaders of the House Taxes Committee on Monday put on paper a tough choice for their colleagues: Whether to raise taxes on the state’s top incomes to ease the burden on most homeowners.
That’s the crux of a tax bill headed for a floor vote as soon as Friday.
Under it, those homeowners would qualify for property tax refunds of $250 to $2,500. But top earners would get stuck with the $440 million tab through a newly created fourth tax bracket of 9 percent.
“We heard around the state that what folks were most angry about in the tax area was their property taxes,” said Committee Chairwoman Ann Lenczewski, DFL-Bloomington. “We’ve been trying to address it.”
Republicans said the reliance on income tax money greatly clouds the proposal’s chances. And they were quick to criticize it for not imposing limits on how fast local governments can raise property taxes, which they fear will cut into whatever relief the state provides.
“This is a wish and a prayer,” said Rep. Kurt Zellers, R-Maple Grove.
But it’s the type of recorded vote that legislators dread because it opens them up to future campaign attacks for either supporting increased income taxes or opposing reduced property taxes.
The bill represents the DFL-led House’s bargaining position as it enters final session negotiations with the Democratic-controlled Senate and Republican Gov. Tim Pawlenty.
Lenczewski conceded it will be hard to guide the income tax increase into law because Pawlenty has said he’d veto increases in state taxes. It could fall away during upcoming House-Senate negotiations if a different revenue source is uncovered.
“I won’t predict whether an income tax would pop out of the conference committee or if there will be something different,” she told reporters.
The Senate has already passed two bills altering the tax code. One would ease homeowner property taxes by charging higher business rates. The other establishes the highest-in-the-nation income tax bracket.
The top rate in the House plan kicks in on taxable income for single filers above $226,000 and $400,000 for married couples with joint returns. By comparison, the Senate is seeking a 9.7 percent tax rate on taxable income above $141,250 for single filers and $250,000 for joint filers.
Differences also remain with the property tax plans.
Rep. Paul Marquart, DFL-Dilworth, estimates that the House bill would cut property taxes for homeowners by 3.6 percent from 2007 rates. Farmers would see an even bigger reduction.
It revises a state refund program to get more relief to more homeowners. People who pay at least 2 percent of their household income in property taxes would qualify so long as they make less than $150,000 a year. Currently, the state refunds don’t go to homeowners earning more than $92,980. The maximum possible refunds also rises to $2,500, up from a current cap of $1,740.
Additionally, the bill permits more apartment dwellers and other renters to tap a separate refund program.
Aside from approving property and income tax plans, senators voted last month to authorize tax breaks for expansions at the Mall of America and publisher Thomson West’s Eagan campus. The House bill contains more limited help for Thomson and nothing for the megamall.
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