September 9 Session Will NOT Revisit B2B Taxes

Governor Dayton and all four legislative leaders met this morning and agreed to hold a Special Session on Monday, September 9, at 10 a.m. to provide disaster relief to the 18 Minnesota counties pummeled by severe storms and floods in late June.

The prospects for a Special Session, first raised by Gov. Dayton over two weeks ago, gave GOP legislators and gubernatorial candidates a platform to demand that recently enacted business-to-business (B2B) sales taxes also be repealed during the Special Session. Gov. Dayton, who initially rebuffed such suggestions, recanted slightly when he announced at Farmfest, a major agricultural event, that he would allow for repeal of the B2B tax on farm equipment repairs to be part of the Special Session. His admission of needing to "fix" the farm equipment repair tax only emboldened the GOP and others in the business community to insist that also repealing the taxes on warehousing, all commercial equipment repairs and telecommunications equipment be part of any Special Session.

The demand for expanding the scope of the Special Session brought the Governor and the four legislative leaders together late last week. No agreement on the scope of the Special Session could be reached, so the Governor explored ways to pay for disaster relief without calling a Special Session. When the Governor's staff at Minnesota Management and Budget found no lawful alternatives for getting counties the dollars needed for disaster relief, legislative leaders scheduled today's meeting with Dayton and resigned themselves to allowing a one-day session that will be limited to appropriating funds for disaster relief only (see attached signed statement).

While legislators on both sides of the aisle are having second thoughts about the B2B taxes passed as part of the 2013 Omnibus Tax Bill, repealing them all would leave a $314 million hole in the state's budget. Gov. Dayton and legislators are counting on an improved economic forecast in November and February to make up the lost revenue to be able to repeal the taxes. Otherwise, legislators would need to enact cuts or raise taxes to make up the difference—and with 2014 being an election year for Gov. Dayton and all 134 members of the Minnesota House, neither of those prospects are an attractive option.