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Minnesota Government Update


February 27, 2009


Governor Pawlenty Accepts Stimulus Package
Governor Tim Pawlenty, meeting with President Obama and a group of the nation's governors, said Monday that Minnesota will use all of the funds available to it under the federal $787 billion economic stimulus plan. Pawlenty joined other Republican governors in criticizing the package but will nonetheless accept the package in contrast to several other GOP governors who might turn down parts of the package, such as portions that require states to match federal dollars to extend unemployment benefits.

Pawlenty has consistently criticized the stimulus package as unfocused and unsustainable because it will increase the national debt. He has said it should have been more tightly targeted on tax cuts and infrastructure projects. At the White House, however, he defended his decision to take the money. Pawlenty stated that Minnesota is a major net contributor to the federal government, and for every dollar Minnesota sends to Washington, the state only gets 72 cents back. He stated, "So, if you're buying the pizza, it's OK to have your slice, even if there are some anchovies on it."

Pawlenty acknowledged a possible presidential run but said he has yet to make up his mind about whether he will seek a third term as governor in 2010. "I've got my hands full with an economic crisis," he said.

Stimulus Transportation Projects Unveiled
Governor Tim Pawlenty presented a list of 60 transportation projects in outstate Minnesota this week. These projects will cost an approximate $180 million that will be funded through the federal stimulus package. Minnesota is expected to receive nearly $600 million for state and local highway and transit projects over the next two years from the stimulus package.

The projects are estimated to create over 5,000 jobs in outstate Minnesota. The projects announced Wednesday include concrete rehabilitation on Interstate 94 near Monticello, repaving Highway 75 north of Ortonville and concrete replacement work on stretches of Interstate 90 in southern Minnesota. The most expensive project allocates $18 million to reconstruct Highway 53 north of Duluth. The projects in the metro area will be announced later in March by the Metropolitan Council and the Minnesota Department of Transportation.

Increase in Funding for Rail in Minnesota
A major spending bill left over from last year's Congress includes $91 million for two Minnesota rail projects involving the Twin Cities and Big Lake. One is a final $71.2 million provision to complete the Northstar Corridor commuter rail project from Big Lake to Minneapolis. The other is a $20 million earmark for the planned Central Corridor light-rail line connecting Minneapolis and St. Paul. The money is part of a massive $410 billion bill being considered in Congress this week, coming directly after the recently enacted $787 billion stimulus bill.

The rail money represents two of the state's highest transportation priorities in the spending package. The Northstar line will stretch 40 miles from Minneapolis to Big Lake, stopping in Anoka, Coon Rapids and Elk River. The proposed schedule includes six trains daily in each direction, mostly to serve morning and evening commuters. The project also includes a four-block extension of the Hiawatha light-rail line that now connects downtown Minneapolis to the Mall of America and the Minneapolis-St. Paul International Airport. The Central Corridor, would be an 11-mile line running from downtown Minneapolis along University Avenue to the State Capitol and downtown St. Paul. It is estimated to be completed by 2014 at a total cost of $920 million, about half of which would come from Washington.

21st Century Tax Commission Unveils Tax Proposals to Legislature
The 21st Century Tax Commission unveiled their proposals to the Legislature on Wednesday at the Senate Committee on Taxes, chaired by Senator Tom Bakk (DFL-Cook).

The Chairman of the Commission, Mike Vekich, who was appointed last year by Governor Tim Pawlenty, said their recommendations focused on creating jobs, creating capital investment and maximizing Minnesota's resources in order for the state to begin competing on the world stage. Vekich stated that the Commission tried to create a plan that reduced the need for subsidies, where taxes are tied to benefits received, a system where businesses are invited to invest in the state, and a system that is resistant to political change and legislative tinkering.

The Commission advised the Legislature to replace the corporate income tax with a broadened sales tax base. Vekich stated that studies claim that if the corporate income tax is reduced by 10%, the state tax base would be increased by 4% and foreign investment in the state would increase by 5%.

The Commission presented the following recommendations:
  • Reduce business tax burdens
    • Repeal the state corporate income tax.
    • Exempt 20 percent of active "pass-through" business income from taxation.
    • Conform to federal tax write-off provisions for business-related assets.
    • Replace the capital equipment sales tax refund with an upfront exemption.
    • Extend the capital equipment exemption to businesses that produce services subject to sales tax.
  • Improve the transparency of business taxation
    • Require a biennial "benefits-received" report of Minnesota business taxation.
  • Simplify the State property tax system
    • Consolidate the property tax classification system.
    • Eliminate Minnesota's high "advertised" property tax rates.
    • Follow through with the scheduled repeal of Minnesota's Limited Market Value law.
    • Promote investments in innovation, entrepreneurship and emerging/high-tech companies.
    • Overhaul the R&D Tax Credit
      • Credit to pass-through businesses (S Corporations, partnerships and limited liability companies).
      • Increase the credit to 10 percent.
      • Make the R&D credit refundable so it can benefit businesses that have no taxable income, or affiliates of corporations that are members of a unitary combined group.
  • Enact the Small Business Investment Act
  • Enact an Early-Stage Investment Tax Credit
  • Encourage low-income entrepreneurship and business creation loans
  • Paying for reform
    • Extend the sales tax base to a broader range of consumer products and consumer services.
    • Increase the excise tax on cigarettes.

For up-to-date information about the Minnesota Legislature, tune into Almanac: At the Capitol. This lively and informative program is aired Wednesdays during the legislative session on Twin Cities Public Television at 7:00 PM on Channel 17 and at 10:00 PM on Channel 2.

Almanac: At the Capitol is seen on all public television stations throughout Minnesota and in Fargo. Winthrop & Weinstine is the exclusive law-firm partner and a sponsor of the program.

For more information and to see previous broadcasts, check out the Almanac: At the Capitol Web site at http://tpt.org/aatc/.
 
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