Gov. Mark Dayton unveils $300 million tax plan while GOP unveils health care blueprint

Gov. Mark Dayton and GOP legislative leaders volleyed competing, big-ticket spending proposals Thursday that if enacted would deliver tax cuts to farmers and families paying for child care, and provide quick financial assistance to people facing steep premium hikes on their health insurance.

Combined, the proposals by the DFL governor and Republicans who control the Legislature would cost the state $600 million — about $300 million each. Coming in the first week of the session, they set an early framework for negotiations and possible clashes between Dayton and legislators in the coming weeks and months.

Dayton's $300 million tax plan caps a busy week of major legislative proposals from the governor. It's the second proposal he revived from two separate pieces of legislation left unfinished last year — a borrowing package to finance more than $1 billion in construction projects across the state, and a tax bill that would benefit more than 450,000 Minnesotans, according to an estimate by Dayton's office.

The bill "provides assistance to those who need it most, while protecting the progress we have made to stabilize our state's finances," Dayton said.

Among those who stand to benefit from Dayton's plan are farmland owners, with a tax credit totaling $34 million that's meant to relieve pressure on local school levies.

"I'm particularly pleased about the agriculture property tax credit that is in this bill," said Lt. Gov. Tina Smith, who joined Dayton for the announcement. "It's not known to a lot of people in the metro area that farm property tax credits have increased over 100 percent over the last 10 years, and that is really putting a damper on the ability of local communities in Greater Minnesota to pass the school levies that are so important to keeping those Greater Minnesota schools strong."

Dayton's tax plan would also expand eligibility for a child-care tax credit, extending it to an additional 95,000 families, and make a $30 million increase in state aid payments to local governments.

In a nod to rural Minnesota, Dayton's proposal would make payments to landowners working to comply with new water quality protections championed by the governor. Eligible taxpayers would get $40 every year for each tillable acre converted into a water-quality buffer strip, areas of vegetation intended to reduce farm runoff into state waterways.

Rep. Greg Davids, the Preston Republican who chairs the House Taxes Committee, said Republicans would find things to like in Dayton's blueprint.

"Of all the tax bills over the years that Dayton has sent over, this is probably the most realistic one I've seen," Davids said.

There were provisions Davids said would be a tough sell, like $94 million to expand a so-called working family tax credit, a refundable credit for low-income individuals.

"We're all for working families, but we like the child-care tax credit better because that actually goes to people who are paying income taxes," Davids said. "With a working family tax credit, we're all for working families but that gives credits to people that pay no income tax so that's kind of a hard one to justify."

Senate Taxes Committee Chairman Roger Chamberlain, R-Lino Lakes, said he hadn't yet reviewed Dayton's proposal. Senate Republicans will unveil their own tax proposal in the coming days, he said.

Along with tax cuts and an injection of state dollars to local governments, Dayton also proposed curbing the use of so-called loopholes and other "tax avoidance strategies." That would generate $80 million over the next two years if implemented, his administration estimated.

Both Davids and Chamberlain disputed Dayton's use of the word "loophole" to describe the tax practices.

"If it's legal, it's not a loophole," Davids said.

The House moved quickly on Thursday on an initial set of tax cuts, voting to approve a so-called "tax conformity bill" that aligns the Minnesota tax code with its federal counterpart. If passed by the Senate and signed by Dayton, it would mean small tax savings for about 220,000 Minnesotans. Dayton included a similar provision in his tax proposal.

Earlier in the day, Republican leaders from the House and Senate proposed financial assistance to about 125,000 Minnesotans who face steep health insurance premium hikes this year but make too much to qualify for subsidies. It would spend $300 million to offer a three-month-long, 25 percent premium reduction to everyone on the individual market who doesn't qualify for other subsidies. After those three months, the assistance would be limited to people who meet specific income guidelines: Individuals who make less than $95,040 per year or a family of four making $194,400 or less.

Sen. Michelle Benson, R-Ham Lake, said it was just the first in what would be a series of health-insurance proposals by Republicans.

Dayton has also proposed about $300 million in premium relief and said he has had talks with Republican leaders about the health care legislation. He said he's concerned about their method for delivering financial assistance.

Under the GOP plan, the premium reductions would be administered by the Minnesota Management and Budget (MMB) office, which would run the calculations to determine who would qualify.

MMB Commissioner Myron Frans said it would be tough to verify income eligibility requirements because it would require coordination with the Revenue Department during the height of tax-filing season.

The money would come from the state's reserve fund, which Rep. Joe Hoppe, R-Chaska, said was an appropriate use for something lawmakers consider an emergency.

"We call it the rainy day fund, and for a lot of people in Minnesota, it's raining," Hoppe said.

Star Tribune staff writer Erin Golden contributed to this report.

Ricardo Lopez • 651-925-5044