Bill to raise Minn. income tax just gets by in Senate

Whether you're a mansion-dweller or just the guy who trims the hedges, you'd be paying more in income taxes under a $2.2 billion tax bill that was narrowly passed by the Minnesota Senate on Friday night.

An almost as hefty tax increase of $1.5 billion will land on the House floor today, and Republican Gov. Tim Pawlenty has promised to veto any tax increase that reaches his desk.

Republican reaction to the Senate's tax increase proposal was swift and harsh during the lengthy debate, while DFLers sat mostly in silence throughout the evening, with few rising to defend the bill. It finally was approved 35-31, with 10 DFLers voting against it.

"This is the worst bill I've seen in the six years I've been here," said Sen. David Hann, R-Eden Prairie. Others said business was being "spanked." Sen. Julianne Ortman, R-Chanhassen, lamented that while the increase was being billed as temporary, "we're going to have this tax forever, until our revenue somehow outpaces our spending."

Senate Taxes Committee Chairman Tom Bakk, DFL-Cook, who sponsored the bill, said it was the best, most responsible answer for a state facing a $4.6 billion deficit and cuts to even essential services. Pawlenty's no-tax record, he said, "is a ruse." Property taxes have gone up, jobs have vanished and more costs had been shifted to local government, Bakk said. "Then the governor says, 'Oh, oh, I haven't raised any taxes. The no-tax strategy is failing Minnesota," he said. "Let's just all admit that. We have less people working in May of this year than in December of 2002. Hardly a success."

At one point, Sen. Steve Murphy, DFL-Red Wing, said simply, "This is a tough vote for everyone. Let's just make it happen.

Even before the vote was cast, Pawlenty sent a blistering letter to Bakk, saying that "you have chosen to pursue reckless tax increases to nearly every Minnesotan" and promising a veto.

Some DFLers also couldn't support it.

"I live in Otter Tail County," said Sen. Dan Skogen, a freshman DFLer from Hewitt. "I would have been hard-pressed to say this was good for the people I represent."

Sen. Kathy Saltzman, a moderate DFLer from Woodbury, said she was troubled by a bill that targeted top earners. "In the long run it went too far," she said of the tax increase.

Pawlenty also took more novel routes for informing others of his displeasure, using his new Twitter account for this tweet mid-debate: "Still can't believe the DFL proposed tax increases that would give us 2 of the top 10 income tax rates in the country!

Bakk defended his bill, saying that a blink-off provision would ensure that the burden was relieved as soon as the state had climbed out of its deficit hole.

That provision would start to turn off the income tax increases, starting with the lowest rate first, as soon as the state started to project an actual surplus. The state's latest economic forecast projects a budget deficit for several years out.

Taxed more at every level

Under the bill, the tax rate on income of less than $33,220 for a married couple would rise to 6 percent from 5.35 percent. From $33,221 to $131,970, the rate would rise to 7.7 percent from 7.05 percent. On income between $131,971 and $250,000, the rate would go to 8.5 percent from 7.85 percent.

A new fourth tier of 9.25 percent would kick in at $250,000 adjusted gross income for couples and $141,250 for single filers. Married couples who file separately would feel the biggest pinch, with the fourth tier kicking in at as little as $125,000.

DFLers in both bodies have argued that the state has suffered not from too much spending but from too little revenue and said the state cannot keep lurching from crisis to crisis, relying on one-time money patches.

Even with the Senate's tax increase and federal stimulus funding, spending in nearly every area -- including schools -- would be cut at least 3 percent under the Senate plan in order to balance the budget without temporary fixes.

Ortman said that even those who pay no state income taxes would suffer under the Senate proposal, noting that a couple earning $35,000 with two dependents who got an earned income tax credit of $378 would see a drop to $320.

'All dress rehearsal'

Republicans in both bodies took a jaded view of the tax bills on Friday, secure in the knowledge that Pawlenty would take the bills down and either force a new round of proposals or possibly trigger the second government shutdown of his six-year tenure.

After seeing amendment after amendment fail on Friday night, Sen. Dick Day, R-Owatonna, waved a dismissive hand and told fellow senators that "we'll start over in 10 days. We know that. This is all dress rehearsal."

Bakk said that he didn't know what the final negotiations with the governor would lead to. "I know we have to have all the options on the table," he said.

Patricia Lopez • 651-222-1288