House panel approves bill that aims to review state tax activity effectiveness, fiscal impact

Providing more accountability and transparency to Minnesotans is a goal of the House Taxes Committee this session.

That group has an opportunity to act on a bill aiming to bring tax expenditures into the budget process.

Sponsored by Rep. Paul Marquart (DFL-Dilworth), HF1019 would create a Tax Expenditure Review Commission staffed by the Legislative Budget Office.

The idea was approved 11-1 Tuesday by the House State Government Finance and Elections Committee and sent to the taxes committee, which Marquart chairs.

The nine-member commission — four representatives, four senators and a Revenue Department designee — would be directed to review state tax expenditures and evaluate each ones effectiveness and fiscal impact.

“There’s about 312 total tax expenditures. If you add ‘em all up it comes to about $15.5 billion a year,” Marquart said. “Once it gets into the tax code there is no line item in the budget, there is no regular review process. Many of these go on auto-pilot and just increase over time.”

In its first three years, the commission would review each state tax to identify its purpose and create metrics to evaluate each expenditure. After the initial review, all tax expenditures would be evaluated at least once every 10 years. Recommendations would go to the House and Senate tax committees.

Rep. Jim Nash (R-Waconia) would prefer more teeth in the bill, but reluctantly voted for it.

“I’m concerned it would be an expense incurred by the state, but it would only result in strong and friendly recommendations to our colleagues who could then — as they so often do — soundly ignore them,” he said.

A fiscal note estimates a $950,000 cost in the 2022-23 biennium and $1.8 million in future biennia.

“This would give the Legislature some really good information that they could look at to then base some decisions,” Marquart said. “Until we kind of even start doing that, there never will be a potential review.”

Beginning with the 2022 legislative session, any bill to create a new tax expenditure or continue an expiring one would need to include an expiration date no later than eight years after the bill’s effective date.

SF1102, the companion sponsored by Sen. Tom Bakk (I-Cook), awaits action by the Senate Taxes Committee.