Gov. Dayton promises to veto tax bill passed by Senate

- Before the Senate could pass a tax cut Wednesday Gov. Mark Dayton promised to veto the bill over a one-time school funding measure that he wants included, but that doesn't necessarily mean the tax cuts are dead on arrival.

If the governor vetoes the bill tomorrow morning as promised, the legislature could still have some time to cobble together another deal to make it easier for Minnesotans to file their taxes next year.

The compromise tax bill between the House and Senate lines up with Governor Dayton's request to base future income taxes on the federal adjusted gross income. But, the legislature went further by also cutting the rates of the first two income tax tiers.

On the first tier bracket, for married couples making up to roughly $38,000 a year the rate would eventually drop from 5.35 to 5.25 percent. 

In the second bracket, for married couples making between $38-150,000 a year the rate would over three years fall from 7.5 to 6.85 percent.

The total cost of the tax bill to the state budget in the first two years is $136 million. that's $2 million less than the one-time boost in school aid the governor is demanding, which is why he's promising to veto the bill Thursday morning.

"I hope they'll agree to include my emergency school aid as part of the tax bill, and then we can negotiate the rest of it and if they can pass something, I'll sign it," Dayton said. "But, it depends upon their willingness to compromise and meet me halfway."

Speaker Kurt Daudt, R-Crown, however, said the governor's school aid is not coming.

"This just came so late that it's very difficult for us to do it. [It’s] totally off the table," he said. "That's up to the members and we're going to have those conversations, but right now it literally doesn't fit into the budget that we have."

Meanwhile, the tax bill is not the only major piece of legislation in jeopardy. The Senate could not get enough votes to pass its bonding bill, often called the construction bill or jobs bill because it borrows money to fund construction projects across the state. In this case, it’s $825 million.

The Democrats wanted to borrow nearly double the amount, but Senate Majority Leader Paul Gazelka said that's not happening.

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