DFLers propose $1 billion tax hike

The plan comes as part of the Democratic response to Gov. Tim Pawlenty’s proposed budget.

Libby George

Higher education, K-12 education and health care program cuts in the House and governor’s budget plans will harm the state’s future, Senate Democrats said Monday.

Calling higher education “the engine that drives the economy,” Senate Majority Leader John Hottinger, DFL-St. Peter, unveiled the Senate DFL budget proposal, which would allot $150 million more to higher education than Gov. Tim Pawlenty’s plan.

In all, the plan would involve spending $1.3 billion more than the governor’s plan.

Democrats also proposed raising $1 billion in tax revenue – a policy the governor and House Republicans have lambasted – through various sources, including a $1 per pack cigarette tax increase, a 9.4 percent income tax increase on households with incomes higher than $250,000 and measures to close corporate tax loopholes.

“We’ve presented a common-sense budget proposal that represents the common good,” Hottinger said. “Taxes are the way people join hands to get things done. That’s the tradition of Minnesota.”

Democrats said they came to the proposal after participating in more than 150 “town hall meetings” in which they claim citizens advocated for tax increases.

“(Minnesotans) want to make sure everyone shares in that budget crisis, and we’ve done that,” Hottinger said.

Assistant Majority Leader Ann Rest, DFL-New Hope, said Democrats are asking the wealthiest to do this with tax increases, which they claim would affect less than 5 percent of Minnesotans.

House opposition

Republicans, however, said the Senate plan would hold no weight in the House.

“They just came up with a plan from Pluto,” House Speaker Steve Sviggum, R-Kenyon, said, adding that the House would absolutely not agree to tax increases.

“The Democratic plan would be dead, absolutely dead on arrival in the House,” Sviggum said. “We made a commitment to citizens of this state, and we will not increase the tax burden.”

House Majority Leader Erik Paulsen, R-Eden Prairie, said Democrats’ tax increases would “chase out entrepreneurs,” harming the state’s economy.

Hottinger and Rest, however, said through fee increases and diminished services in the House and governor’s plans, “taxes” are also increased.

“The governor’s proposal raises taxes. The House proposal raises taxes,” Rest said. “The conversation is what taxes to raise.”

Sviggum said the House only raises taxes where others are cut, adding that the $1 per pack cigarette tax increase will only be included in the House plan with cuts in the sick tax.

The Senate plan also restores $200 million in local government aid to fund police and fire departments and $571 million in senior and health care funding. It cuts $132 million in government spending.

Hope for students

Sen. Sandra Pappas, chairwoman of the Higher Education Budget Division, said she is “thrilled” with the increases the DFL proposed for higher education.

“I’m hoping that with these more modest cuts, we’ll be able to maintain the quality of programs at the University,” the St. Paul Democrat said.

She added that more money will make passing a budget proposal out of her committee much more feasible.

However, Higher Education Finance Committee Chairman Rep. Doug Stang, R-Cold Spring, advised the University and Minnesota State Colleges and Universities to not get excited about the proposal.

“I would warn MnSCU and the ‘U’ to be very cautious in getting excited if this increase is based on tax revenue,” Stang said. “(House) numbers are probably more realistic.”

In its proposal, the House recommended $50 million more for higher education than the governor.

Negotiations begin

While Sviggum said he agreed with little in the Senate plan, and Hottinger called the House plan “an assault on Minnesota values and priorities,” both said a special session will be avoided.

“We have six weeks to enter into good-faith negotiations,” Hottinger said. “We have no intention of going into a special session.”

Sviggum agreed.

“We have to finish by May 19,” he said, adding the process would not necessarily be pretty.

“Negotiation is a process that is sometimes like making sausage and sometimes like making a wedding cake,” Sviggum said. “It can be as beautiful as the latter or as ugly as the former.”