By Bill Salisbury

MCT Information Services

ST. PAUL — In an 11th-hour bid to provide some tax breaks for businesses, the Republican-controlled Legislature passed a scaled-down, $46 million tax cut on Thursday, May 10, that proponents contend would create thousands of jobs.

But the bill faces an uncertain future when it reaches DFL Gov. Mark Dayton’s desk. Last Friday he vetoed a more generous tax cut package because he said it would make a projected $1.1 billion deficit in the state’s next two-year budget worse. That bill would have cut state revenue by $145 million in 2014-15.

Senate Taxes Committee Chair Julianne Ortman, R-Chanhassen, said the latest tax bill would only have about $40 million in “tails,” or lost revenue, in the next biennium. That would just be a “rounding error” in the state’s $34 billion budget, she said.

But Senate Minority Leader Tom Bakk, DFL-Cook, said Dayton would not sign any bill that increases deficit spending.

“You and I both know this bill isn’t going to be enacted into law,” Bakk told Ortman during the Senate floor debate.

But Dayton spokeswoman Katie Tinucci said Dayton hasn’t reviewed the bill and won’t make a decision on it until he does.

Ortman urged senators to vote for even if it might be vetoed because it would spark business investments that would create jobs.

Cutting taxes and creating jobs are Republican’s top priorities this year, she said, and this bill does both.

The Senate passed the bill 41-24, largely along party lines, at 1 a.m. Thursday. The House had approved it 73-56 on Wednesday.

It was the last big bill lawmakers planned to pass before tackling the Vikings stadium bill that has dominated the legislative session. Both houses were set to adjourn for the year after the stadium vote.

An all-Republican conference committee quickly assembled the tax bill Wednesday morning.

“This is another smokin’ hot tax bill,” said House Taxes Committee Chair Greg Davids, R-Preston. “There’s no reason for the governor to veto this bill.”

But Democrats criticized Republicans for increasing deficit spending and providing tax breaks to businesses but not homeowners or farmers.

“It has a bag of goodies for a select few that we aren’t paying for,” said Rep. Ann Lenczewski, DFL-Bloomington.

Davids said the bill was a genuine compromise with Dayton, although the governor and his staff had not agreed to it. “We went more than half way,” he said.

The measure would provide businesses with 50 or fewer employees an upfront sales tax exemption for capital equipment purchases, cutting their taxes by $12.6 million in the year starting July 1. Larger companies would still have to pay the taxes and apply for a refund later.

It would freeze the statewide property tax on businesses in 2013, resulting in a $10.2 million tax cut.

The state would offer an additional $4.5 million in “angel” tax credits to encourage investments in startup companies and an extra $3.8 million for research-and-development tax credits under the bill. It also offers a tax credit for hiring unemployed veterans and extends a tax exemption for student loans.

To replace the revenue lost to those tax cuts, the bill would tap the state’s rainy-day budget reserve for $27.9 million. It would have $73.3 million in “tails,” or lost revenue, but Ortman said higher-than-expected tax collections and other savings would reduce the tails to $40 million.