The DFL’s anti-tax cut argument amounts to this: Spending increases, especially to K-12 education, always takes precedent over cutting taxes. In the DFL’s mind, there’s never a time when tax cuts are justified. That’s perfectly understandable considering who the DFL’s special interest allies are. Sitting atop their list are the environmental activists and Education Minnesota. Now that House and Senate Republicans have reconciled their tax cut/conformity bills, it’ll be interesting to see how Gov. Dayton will rationalize his veto of another set of tax cuts.
While it’s true that Gov. Dayton signed tax cut legislation last year, it’s also true that Gov. Dayton defunded the legislature after he signed the tax cut legislation. Further, Gov. Dayton fought those tax cuts tooth-and-nail but was forced to sign it. He was heading towards shutting government down again so, rather than shutting it down like Gov. Dayton and the DFL did in 2011, Gov. Dayton signed the tax cuts, then line-item-vetoed out the legislature’s operations budget. Let’s not forget that Gov. Dayton reneged on the previous year’s tax cuts after promising to sign those cuts.
The House and Senate deal lowers the state’s first tax bracket from 5.35 percent to 5.25 percent. The change affects a single filer’s earnings below $25,890 and a couple’s below $37,850. The second tax bracket rate drops from 7.05 percent to 6.85 percent. This decrease affects a single filer’s income between $25,891 and $85,060 and a couple’s between $37,851 and $150,380. The rate reductions would take place over two fiscal years, so the lower rates would be in place by 2020. The changes would cost $137 million this year and $341 million by 2020.
Here’s a fearless prediction: the DFL will criticize the House-Senate GOP tax cuts as tax breaks for big corporations. What the legislation says is irrelevant to the DFL. What’s important to the DFL is that they’ve rehearsed their lines properly.
If Gov. Dayton vetoes the GOP tax cuts/conformity bill, the DFL will have to justify to voters why they voted unanimously against the bill. PS- I suspect Gov. Dayton will veto the bill, though I also think he’ll try negotiating a smaller tax cut. If Republicans push him on this, they’ll win the policy fight and gain a big issue for the campaign.