Minnesota's GOP senators propose $900 million in tax cuts

Senate Republicans, newly ensconced in the majority after a November election victory, proposed $900 million in tax cuts Thursday, the bulk of it a cut to the lowest income-tax rate.

Joined by a farmer, business owner and senior citizen at a news conference, the GOP senators offered no details about the size of the various components of the tax cut measure, but they said a reduction of the lowest income tax rate — currently 5.35 percent — would be the largest piece of the $900 million total.

"We spent years building stadiums and giving handouts to a lot of people," said Sen. Roger Chamberlain, R-Lino Lakes. "It's time we paid attention to middle-class Minnesotans and paid them some respect," he said.

The Republican tax cut proposal, which will soon be followed by a plan from House Republicans, sets up a high-stakes budget battle with Gov. Mark Dayton, as GOP lawmakers and the second-term DFL governor try to agree on a two-year budget that will top $40 billion.

The projected budget surplus is currently $1.65 billion, having grown $250 million since late last year because of increased tax collections.

Senate Republicans said they will announce spending plans at a Friday news conference and a proposal for roads and bridges Monday. The Senate passed a measure Wednesday that would provide $600 million to prop up the state's beleaguered individual health insurance market.

Dayton, who will discuss his updated budget proposal at a Friday news conference, has already called for targeted tax cuts, as well as using a portion of surplus dollars to expand prekindergarten programs at public schools, increase funding for public universities and raise enrollment in the state's MinnesotaCare public health program.

By cutting the rate of the lowest tax bracket, Senate Republicans would direct the savings at working-class and middle-class Minnesotans, reflecting their fragile political reality — the GOP has a one-vote Senate majority.

Sen. Ann Rest, DFL-New Hope, said the plan is not properly targeted at the middle class and would allow wealthy taxpayers to enjoy the tax cut benefit as well.

In 2016, the Legislature passed with large bipartisan majorities a tax-cut bill directed at a variety of interest groups, but Dayton vetoed it because, he said, it contained a drafting error that would have cost the state millions.

Other features of the Senate GOP plan include a cut in taxes on Social Security benefits; a tax credit for college graduates paying off student loans; a cut in the statewide business and industrial property tax; a tax credit for farmers on school bond taxes, and an estate tax cut.

Chamberlain acknowledged that the price tag would grow in future years.

But he also said at a Thursday news conference that he will not surrender the state's fiscal health to a tax-cutting binge.

"I want to see how their numbers work in the next biennium and then the biennium following," he said.

Dayton said he remains concerned about how policies out of Washington — especially health care — could affect Minnesota's budget outlook.

"We have worked so hard in the past six years to re-establish fiscal integrity and stability of Minnesota government," Dayton said.

"I'm not going to walk out the door in January 2019 leaving my successor the kind of deficit situation I encountered."