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Tax debate ends with one bill signed, one pocket veto
This afternoon, we saw the final chapter of the tax debate for the 2012 Legislative Session as Governor Dayton took action on the two remaining tax bills. And we are largely back where we started, with some of the most dangerous proposals rejected along the way, but also little progress in reforming the tax system so that it adequately funds our state’s priorities and fairly distributes the responsibility for funding those priorities.
House File 2690 is mainly a technical bill, but last week it picked up a few provisions from a tax bill vetoed earlier this session, such as a one-time $4 million increase in the targeted property tax refund. This tax refund is available to homeowners of any income level whose property taxes increase by 12 percent and at least $100 over the previous year. Governor Dayton signed this bill into law today.
House File 247 was a more substantive bill, including tax provisions that its proponents argued would help spur economic growth in the state, such as:
- A one-year freeze in the state property tax paid by businesses and cabins
- Other tax credits for certain businesses and investors
- An increase in the targeted property tax refund in future years
- Local tax incentives.
(You can read more of the details in last week’s blog.) A primary problem with the bill is that it would have added $73 million to next biennium’s revenue shortfall, currently measured at $1.1 billion, leaving future policymakers to define which revenue increases or service cuts would be needed to finance the tax cuts.
These tax provisions were also unlikely to get a strong bang for the buck, as some of the tax benefit would reward actions that would have occurred anyway.
In a letter to the Legislature, Governor Dayton raised his concerns with the bill, including the increase in the future deficit, and that the benefits of the tax cuts were not more widely shared. House File 247 failed to become law through a “pocket veto” – which means that the Governor returned the bill to the Legislature without his signature, but without formally vetoing the bill.