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Minnesota Senate passes GOP tax cut, but fight will continue

Republicans argue the best use for the state's budget surplus is to cut taxes, while Democrats say that plan will exclude those at the lower end of the income scale.

ST PAUL, Minn. — The Minnesota Senate's Republican majority passed an $8.4 billion tax cut bill Thursday even as leaders acknowledged that the final tax plan that emerges from the legislative session could look very different.

The centerpieces of the GOP tax plan include permanent income tax cuts for everyone who pays state income taxes and excluding all Social Security income from the state income tax instead of the current partial exemption. Democratic leaders say the plan would disproportionately benefit the well-off, but six Democrats joined with Republicans on the 42-24 vote to approve the package.

Senate Taxes Committee Chair Carla Nelson, of Rochester, and Majority Leader Jeremy Miller, of Winona, said at a news conference that the best use for the state's projected $9.25 billion budget surplus is to give it back to the taxpayers with permanent tax relief.

“We feel that it's very, very important to put more money in the pockets of working Minnesotans every single paycheck, week after week, month after month, year after year,” Miller said.

But Democratic Minority Leader Melissa López Franzen, of Edina, called the bill “irresponsible and costly." She said it leaves out over 540,000 taxpayers at the lower end of the income scale who would would get nothing. She said it squanders the chance to use the unprecedented surplus to help those who really need it instead of those at the top of the income scale.

“It fails our schools, it fails our working families, and it fails all of our communities,” López Franzen said during the floor debate.

The Senate GOP bill would cut taxes by $3.4 billion in the current budget for a total of $8.4 billion over the next three years. It would reduce the rate for the bottom tax bracket from 5.35% to 2.8%, which Republicans say would benefit 2.4 million filers with an average annual savings of $759.

The plan has little common ground with the competing $1.6 billion tax bill unveiled by the House Democratic majority on Monday, foregoes an across-the-board income tax cut in favor of targeted relief through expanded child care and property tax credits and refunds. It would also eliminate taxes on Social Security for seniors with annual incomes under $75,000.

The Senate voted 25-41 to reject an attempt by Democratic Sen. Ann Rest, of New Hope, to replace the GOP package with Democratic Gov. Tim Walz's proposal to tap the surplus for one-time income tax rebates of $500 for individual filers and $1,000 for couples filing jointly. House Democrats did not include the governor's proposal in their tax bill.

The wide gulf between the House and Senate tax bills will be the subject of negotiations between legislative leaders and the governor in the weeks before the mandatory adjournment date of May 23, and they're bound to be contentious.

“There will be a second tax bill coming” sometime after lawmakers return from their Easter-Passover break, Rest conceded to reporters.

Miller said it was too early to answer whether Republicans could accept a deal that doesn't cut income taxes.

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