Dayton takes his tax and spending proposals on the road

DULUTH – DFL Gov. Mark Dayton came to friendly ground Wednesday night to kick off a statewide campaign-style sales pitch for his plan to raise taxes on high earners and smokers to increase spending for schools and public safety.

"It's simple tax fairness," he told a feisty, standing-room-only crowd in Duluth. "I believe that Minnesotans will do better and favor a balanced approach."

He began his four-city barnstorming tour as fellow DFL leaders in the House and Senate unveiled separate budget plans that differ significantly on taxes and spending.

Dayton is in a rare and enviable moment in any political career, joined with a Legislature of the same party as they try to tackle some of the state's biggest problems, including how to plug a $627 million projected budget deficit and still leave a lasting mark on state finances. No longer blocked by Republicans' refusal to raise taxes, Democrats are free to raise new revenue and use the windfall to make good on long-sought priorities with bipartisan support such as education, job creation and public safety.

But conflicting priorities between Dayton and Democratic leaders in the House and Senate are coming into focus during these dramatic and high-stakes final weeks of budget negotiations.

Rather than lining up behind Dayton's plan, Senate DFLers unveiled their own proposal Wednesday to raise $1.4 billion in new taxes. Among their top goals: Return a giant share, about one-third, to taxpayers in the form of property tax relief.

"Property tax relief can't come soon enough for Minnesota families," said Senate Majority Leader Tom Bakk, DFL-Cook.

House Democrats released their own plan on Tuesday, calling for a historic income tax surcharge that would speed repayment of more than $850 million owed to public schools. The temporary tax hike on those netting more than $500,000 a year — the top 1 percent of all Minnesota tax filers — would slingshot Minnesota's income tax rate into the the realm of the three highest in the nation.

Dayton stressed that the state is falling way behind in public investment, saying funding for colleges and universities is at a three-decade low.

"We are not making the investments we need … to allow education to be affordable to students and their parents," the governor said.

Dayton has an enormous political stake in the outcome of budget negotiations. This could be his best and only chance to finally make good on his campaign pledge to raise taxes on high earners. He would face dramatically stiffer opposition if Republicans reclaim even one legislative body in next year's election.

Though firmly in the minority, Republicans remain adamantly opposed to tax increases, arguing that the DFL budgets offer little reform or new ideas.

"Senate Democrats continue to propose job-killing tax increases despite our struggling economy," said Senate Minority Leader David Hann, R-Eden Prairie. "We should make sure every dollar the state takes is used efficiently and effectively before we ask Minnesotans to pay more."

The governor told the group in Duluth that years of budget reductions and one-time budget patches have exacted a heavy economic toll on the middle class. He said it is time to restore fairness to Minnesota's budget by requiring its wealthiest residents to help return the state to financial balance.

"I don't want to raise taxes on middle-income Minnesotans," Dayton said. "They already pay too much."

He wants to use the money to wipe out the deficit and invest in all-day kindergarten around the state, a move he and many business leaders believe will better prepare Minnesota children for the demands of an ever-changing workforce.

Dayton has also embraced a nearly $1 hike in the tobacco tax. That would be most painful for low-income Minnesotans, but health officials have persuaded the governor that higher-priced cigarettes will deter children from picking up the habit and will spur more adults to quit.

"I was a tough conversion on that," said Dayton, noting the tax fairness issue. "But there's a social purpose," in getting people to quit.

Many Minnesotans in the northern part of the state strongly support Dayton's proposed tax on high earners, which has polled strongly for years.

At least part of the reason for the strong support is that his tax hike on high earners is limited to a fraction of the population. About 42,800 joint filers would pay on net income above $250,000. Fewer than 10,000 single filers would be subjected to the higher rate.

"I am in the middle class, so that idea doesn't bother me one bit," said Betty Weske, an 80-year-old retiree from Moose Lake. She also likes Dayton's proposal to boost the tax on cigarettes.

"Who likes smoking anymore?" Weske asked Wednesday.

But some of those struggling in the blue-collar reaches of northern Minnesota oppose the tobacco tax hike.

"All of us close to minimum wage are right on the edge," said Jeff Dianoski, a mechanic and pack-a-day smoker from Detroit Lakes. "If they raise the tax a little bit, I can't take that. I am going to have to quit. They should find the money somewhere else."

Joyce DeJoy voted for Dayton, but said she doesn't support tax hikes until Dayton convinces Minnesotans that every fold of fat has been trimmed.

"So, he has a little bit of selling to do on the budget," she said.

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