House tax proposals: keeping track of all the pieces

The Minnesota House of Representatives will take a vote on the omnibus tax bill sometime today. Here are some of the major components of this bill (HF 3149).

  • The homeowner property tax reform proposal contained in the property tax division report. The proposal would combine the dollars that go to the current Homeowner Property Tax Refund (aka the Circuit Breaker), the Market Value Homestead Credit and the itemized deduction for property taxes, and replace these three provisions of law with a new Homestead Credit State Refund.
  • Increasing the June Accelerated Sales Tax from 80% to 85%. June Accelerated Sales Tax is a timing shift whereby retailers must submit some of their June sales tax liability early. This is a further increase on top of what was already passed earlier this year.
  • Allowing no additional JOBZ business subsidy agreements after June 1, 2008.
  • Significant increases in aids to local government in the next biennium. General state aid is increased $100 million for cities, $40 million for counties and $6 million for townships.
  • A few items from Rep. Lenczewski’s corporate tax reform bill (HF 4103).

The total general fund impact of this bill is $106,000 in revenue raised in FY 2008-09 and a $97 million increase in expenditures in FY 2010-11. Rep. Lenczewski has noted in committee that this amount is paid for through the FOC provisions in HF 1812, the House’s Supplemental Budget Bill, currently in conference. HF 1812 contains several significant revenue provisions:

  • Repeal of Foreign Operating Corporations and the Foreign Royalty Subtraction. This is the most sweeping of the FOC proposals on the table this year, and raises $186 million this biennium and $363 million in FY 2010-11. The FOC proposals put forward by the Governor and in the Senate omnibus tax bill are significantly smaller.
  • Changing the cap on securities registration fees (the Governor has a similar provision).
  • Provisions relating to “tax haven corporations”.

It’s still not fully clear where the ultimate fate of the tax items in HF 1812 will be decided: in the conference committee addressing HF 1812, or in a future tax conference committee. It may not matter that much how these items are conferenced, as the ultimate fate of several revenue provisions are likely to be determined as part of a yet-to-be-reached global agreement between the House, Senate and Governor. I would guess that FOCs, the future of JOBZ and increases in state aid to local governments all will be part of the global agreement discussion.

And don’t forget that HF 3201, containing a number of federal conformity items and provisions from last year’s vetoed omnibus tax bill, was also passed earlier this session.

-Nan Madden

About Nan Madden

Nan Madden is director of the Minnesota Budget Project.
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