Final $2 Billion Tax Deal Merges 3 Plans

Bakk, Thissen

By Don Davis

The Minnesota House, Senate and governor’s office agreed to a tax plan Thursday night, four months after the Legislature started and four days before lawmakers must wrap up work for the year.

The tax plan is a merger of what the Democratic-controlled House and Senate and Democratic Gov. Mark Dayton wanted. It is a refinement of a tax and budget deal announced Sunday.

The tax increase would bring in $2 billion in new revenue to help support a $38 billion, two-year budget.

While legislative tax negotiators still need to fill in details, here is what Dayton, Senate Majority Leader Tom Bakk, DFL-Cook, and House Speaker Paul Thissen, DFL-Minneapolis, announced Thursday night:

— The top 2 percent of Minnesota earners will pay 9.85 percent of their income in taxes, up 2 percentage points from the current top rate. The tax affects couples with at least $250,000 in taxable income and individuals earning $150,000.

— Sales taxes will not rise on consumer goods such as clothing, but some businesses will pay sales taxes on services and goods provided by other businesses. Included will be electronic equipment and repair and warehousing.

— Cigarette taxes will rise $1.60 a pack to $2.52 a pick, the same as Wisconsin charges and higher than any other Minnesota neighbor.

— Minnesotans should see about $400 million in property tax relief due to higher city aid payments and dropping a requirement that cities and counties pay sales tax. Also, property tax refunds would be enriched.

— Some corporate tax loopholes will be closed.

“There are a lot of details for the tax committee to work out,” Thissen said.

Bakk said the rest of the state budget should fall in place quickly now that the tax deal is in place.

“This is the lynchpin of the session,” Bakk said.

Dayton said the latest agreement fulfills promises Democrats have made to improve education funding and make other changes without using financial gimmicks.

Democrats said they are imposing no new taxes on middle-class Minnesotans. However, Republicans disagreed.

“Every Minnesotan will pay more,” said House Minority Leader Kurt Daudt, R-Crown.

Senate Minority Leader David Hann, R-Eden Prairie, said the business sales tax Democrats propose will filter down and be paid by average Minnesotans.

The DFL leaders dropped a House plan to place a surcharge on the richest of the rich to repay money the state has borrowed from schools.

Dayton and legislative leaders said they will pass a $400 million Mayo Clinic request, even though Senate Tax Chairman Rod Skoe, DFL-Clearbrook, and House Tax Chairwoman Ann Lenczewski, DFL-Bloomington, said they do not place a priority on the project. Mayo seeks state aid to prepare Rochester for a $3 billion Mayo expansion.

Lenczewski said “we have paid far too much time” on the Mayo plan this year. “I’m at my limit.”

She said that as the session’s end approaches, members should not rush through a plan.

“I’m willing to wait until next year,” Lenczewski said.

Skoe said he had his staff working on “more important issues” than the Mayo plan.

Dayton and legislative leaders said tuition at state-run colleges and universities will be frozen.

Democrats have enough votes to pass all of the provisions without Republican help.

Education is the largest single portion of the two-year budget that begins July 1. Negotiators continued to write that bill Thursday night, but the second-largest bill, funding state health programs, appeared close to wrapping up.

The first of nine budget bills — dealing with public safety and jobs — began showing up in the House and Senate Thursday after conference committees negotiated differences and rewrote bills passed earlier.

On the House floor today will be an $800 million public works bill to be funded by the state selling bonds. Other budget bills also are expected in both chambers.

With the state constitution setting Monday as the last day lawmakers can meet this year, unless the governor calls a special session, plans are in place to meet Saturday and Sunday.

On Saturday, the House is expected to take hours debating a bill allowing child care providers and personal care attendants to join unions. The Senate took a modern-day record 17 hours to debate the measure earlier this week.