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Published by: jkboyne on Mar 22, 2012
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Star Tribune Editorial: February 4, 2012
Thorough reform of the way Minnesota taxes businesses is at least a year away at the StateCapitol. But for understandable economic and election-year reasons, the political itch isintensifying to make a modest down payment on lower, smarter business taxes this year.Republican legislative majorities say now's the time to begin a multiyear teardown of the 11-year-old statewide business and seasonal-recreational property tax. It's a tax oddity developed aspart of the 2001 property tax overhaul to put a floor under business property taxes for education'ssake. Only a dozen other states employ such a tax.Some DFLers are nodding in tentative agreement with the Republicans. DFL Gov. Mark Daytonis not among them. He has his own idea: a one-time tax credit -- $3,000 per new hire this year,$1,500 in the first half of 2013 -- for new hires from the ranks of the unemployed, veterans andnew college graduates.Dayton would do well to give the GOP alternative serious consideration. For a comparableexpenditure of state revenues in fiscal 2013, the Republican plan offers many more businesses apromise of lasting relief from a regressive tax -- that is, one that is borne disproportionately bylow- and middle-income Minnesotans, in the form of higher prices and lower wages (see box,above right).Amid the overblown partisan rhetoric about how government "uncertainty" is damaging thebusiness climate lies a kernel of truth: Businesses don't respond well to short-term tax incentives,here this year and gone the next. A decision to hire is a long-term commitment by an employer.Few such decisions are likely to be much swayed by a one-time credit, particularly one as smallas Dayton proposes.Dayton's tax credit would deprive the state of $35 million in forecasted revenue. He proposes torebalance state books by eliminating some or all of a tax advantage for foreign-operatingcorporations that has morphed into a tax dodge unintended by the lawmakers who created it inthe late 1980s. Closing that corporate tax loophole is a change long sought by DFLers andresisted by Republicans.By comparison, Republicans propose to spend $31 million in fiscal 2013 to begin a 14-yearphaseout of the $800-million-per-year "state general levy." They say they can find additionalspending cuts in the current budget to pay for it. Depending where they look, they'll meet withstiff resistance in the governor's office.To be sure, those are two distinct approaches with two different funding strategies. But it wouldbe a shame -- and a telling failure of divided government -- if those differences cannot bebridged in a year when both parties say that a small, stimulative business tax break is bothaffordable and warranted.Compromise could take a number of forms. Here's one: Dayton could agree to trimming thebusiness property tax -- but not to putting into law a schedule for phasing out the tax through

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