Pawlenty's eager to veto DFL taxes

Despite the promise of a swift gubernatorial veto, the DFL-led Senate and House narrowly passed a budget-balancing package Monday that includes a $435 million income tax increase on higher earners.

The bill adopts most of Republican Gov. Tim Pawlenty's proposed cuts, using the tax increase to bridge the gap. DFL leaders crafted the proposal over the weekend to address the state's $3 billion deficit and hustled it through committees Monday morning. They pushed it through both chambers by nightfall over the heated protest of Republicans and with only shaky support of their own members.

The bill squeaked through the Senate, 34-33, before clearing the House 71-63. All yes votes were cast by DFLers. All Republicans voted against the package, joined by 12 DFLers in the Senate and 16 in the House.

Pawlenty, who has made anti-tax promises a hallmark of his two terms, plans to veto the bill Tuesday.

"The DFL's proposed tax increase is like Jason in 'Friday the 13th' -- it's scary and it keeps coming back," he said earlier in the day. "I know the DFL doesn't look to me for advice, but here's a tip: People want government spending cut, not taxes increased."

Sen. Tarryl Clark, DFL-St. Cloud, cast the tie-breaking vote after the Senate deadlocked for nearly half an hour. A candidate for the Sixth District seat held by U.S. Rep. Michele Bachmann, Clark was quickly vilified by Republicans for her position.

Minnesota Republican Party chairman Tony Sutton said Clark had established herself as a "reliable tax-and-spend liberal" who had a record of supporting tax increase proposals. "The Sixth District isn't going to support a candidate like Clark, who is constantly voting to add to the tax burden of hard-working Minnesotans."

Clark apologized after the vote for arriving late and told members she was held up by a family emergency, not any apprehension about the vote.

Edging toward standoff

Legislators appear to be careening toward another end-of-session budget standoff.

They have already rejected Pawlenty's budget, and he is poised to kill theirs. Both sides could be left with smoldering, left-for-dead budget proposals only a few days before next Monday's adjournment.

The state was thrown into a last-minute budget crisis last week when the Minnesota Supreme Court ruled that Pawlenty acted illegally last summer when he attempted to cut and shift $2.5 billion to single-handedly balance the state's budget. The court decision sent the deficit soaring to $3 billion.

As part of Monday's budget-balancing bill, the House and Senate package would accept most of the cuts Pawlenty has asked for on local government aid, the renters' credit, the political contribution refund program and others.

DFL legislators refused to cut as deeply into some areas of health and human services, such as dental care for the poor, child support enforcement and emergency assistance, triggering the income tax proposal.

"We've taken 85 percent of the governor's solution," said House Majority Leader Tony Sertich, DFL-Chisholm. "All we're asking for is about 10 to 15 percent."

Republicans vowed to uphold a veto and saw the close votes as a sign that even some DFLers lack the resolve to raise taxes.

"The $400 million in tax increases isn't going to happen, and a veto's not going to get overridden," said Rep. Paul Kohls, R-Victoria. "So, I'm glad we can get through this exercise quickly."

In the Senate, most of the DFLers who voted against the proposal are in their first term and face tough election battles.

Sen. Kathy Saltzman, DFL-Woodbury, said she could not support a seemingly doomed 11th-hour tax increase proposal.

"We need to be realistic in terms of what we put forward in terms of a solution," she said. "If it's just going to be vetoed, then let's just get serious about how we are doing this."

Under the DFL proposal, married couples filing jointly with taxable income above $200,000 would pay a new tax rate of 9.15 on income beyond that amount. The current rate is 7.85 percent. Single filers with taxable income above $113,000 also would pay the higher rate.

That means a married couple with a taxable income of $250,000 would pay an additional $478 in tax year 2010. A couple with $500,000 in taxable income would pay an extra $5,395.

The income tax change would affect about 122,000 out of 2.1 million tax returns statewide.

Roughly 75 percent of the $395 million raised by the proposal would come from filers with taxable income above $500,000, said Senate Taxes Chairman Tom Bakk.

Bakk said the increase includes a "trigger mechanism," that would sunset the tax increase at the end of 2013 if the state has a projected surplus of $500 million or more.

The other $40 million in new revenue would come from ending a plethora of President George W. Bush-era tax breaks for the wealthy a year before they are already set to expire.

DFL leaders are pushing the tax increase as a possible long-range means of repaying one of the most controversial elements of Pawlenty's budget package -- $1.7 billion in delayed payments to K-12 schools. Pawlenty maintains that he has made tough cuts without reducing money for K-12 classrooms.

But Senate Majority Leader Larry Pogemiller, DFL-Minneapolis, has said the "shift" functions more like a cut because the state's budget forecast is so bleak there's little chance schools will be repaid in the foreseeable future.

Pogemiller said the tax increase would give school officials added comfort that they will eventually get paid back.

Staff writer Mike Kaszuba contributed to this report.

Baird Helgeson • 651-222-1288