We’re at that turning point in the legislative session where we are close to understanding the Governor’s budget proposal and starting to get a glimpse of what the legislature will do.
The Governor’s revised budget does not make many changes to the taxes and aids to local governments part of his original budget proposal. However, since most tax provisions are based on the economy, the fiscal impact of his proposals have all been updated to reflect the new forecast. With these latest figures, the Governor’s budget includes $254 million in tax cuts for businesses and $531 million in spending cuts, primarily to aids to local governments and various property tax credits.
The one new item is a proposal to conform to a piece in the federal economic recovery legislation. The Governor proposes to exempt the first $2,400 in unemployment insurance benefits from state income taxes in 2009 – matching the new federal benefit.
The House and Senate have released their targets, with both indicating that they will pass some tax increases as part of their overall approach to addressing the $6.4 billion deficit. Many legislative leaders have also talked about the importance of restoring some fairness to the tax system, citing the growing regressivity recently measured in the Tax Incidence Study.
One step the legislature should take in the name of tax fairness is to reject the Governor’s proposal to cut the Renters’ Credit. Rental property taxes are among the most regressive taxes in Minnesota, and they have been growing more regressive. In a recent analysis, Minnesota 2020 found that rental property taxes have grown significantly since 2004 and the Renters’ Credit has not been able to keep up. As a result, rental property taxes have become significantly more regressive. Any cuts to the Renters’ Credit would only make this worse.
The Governor’s proposal would cut the Renters’ Credit by $51 million – not only increasing the regressivity of the system, but also taking $51 million out of our local economies.
The Minnesota Budget Project has been asking organizations to join a sign-on letter opposing these cuts and asking individuals to make calls to legislators. Both of these calls to action, as well as other resources, are at our Renters’ Credit at Risk web site. The House Property Tax Division will be releasing their bill next week, so now is the time to act!