There was little agreement Wednesday between Democrats and Republicans on Gov. Mark Dayton’s tax proposals. One point of consensus, however, was that the final package may look drastically different when the final product comes together this spring.
Area lawmakers who were reached Wednesday in St. Paul, peppered their responses with terms such as “preliminary conversations” and “starting point.”
Rep. John Ward, DFL-Baxter, said there would probably be a House tax proposal, a Senate tax proposal and minority tax proposal. In his previous six years in the Legislature, he didn’t recall any initial tax proposal that stayed the same throughout the session.
“Even the governor conceded this is a first step,” Rep. Joe Radinovich, DFL-Crosby said.
“Its a balanced budget,” Ward said. “There’s no gimmicks. No short-term type of tactics. It has revenue. It has cuts. It has reform and redesign.”
Ward said the measures address significant property tax reform and relief. He said the revenue increase called for by Dayton’s tax plan were overdue.
“Had we done some of this 10 years ago we probably wouldn’t be talking about it right now,” Ward said. “It’s about time, it’s not just the right time.”
Sen. Paul Gazelka, R-Cass County, said he was surprised at how big of a tax increase ($2 billion in the sales tax) Dayton proposed. He said he feared the expansion of the sales tax to include items such as haircuts and work boots will hit people who can least afford the hikes. Gazelka also expressed disappointment that even with the tax increases Dayton is asking for, the schools would still not be paid back the money taken from them in the revenue shift that was done during the last legislative session. The District 9 senator faulted the Dayton proposal for “not reducing spending just having a dramatic increase in revenue.”
Republicans, he said, were unsuccessful in the last legislative session in their efforts to extend the waiting period for welfare recipients who moved to Minnesota from other states from 30 to 60 days. He said the GOP also pushed for Electronic Benefit Transfer (EBT) cards that could only be used in Minnesota or possibly neighboring states.
The total budget of $37.8 billion represents about a 7 percent increase over the last budget, Gazelka said.
By lowering the corporate tax, Gazelka said that, under Dayton’s plan, Minnesota would drop from the fourth highest to the 12th highest, but many business deductions would be taken away from businesses and more revenue would be raised overall.
“Definitely, this is not giving businesses a break,” Gazelka said.
Gazelka said one positive aspect of the Dayton plan is the $500 per-person rebate for property tax relief.
“When you add it all together, it’s a massive tax increase,” Gazelka said.
Rep. Joe Radinovich, DFL-Crosby, liked that there was a large investment in education and that it was a no-gimmicks budget.
“I support new revenue,” he said. “I campaigned on new revenue. I don’t think we can have cuts only.”
The freshman lawmaker said he’s reserving judgment on the sales tax with the broadened base and lower rate. He noted that families would not have to pay sales tax on clothing items that cost less than $100.
“We’re not trying to make this a tax on kids growing out of their clothes every year,” she said.
He applauded what he perceived as an effort to move away from reliance on the property tax. He said he would like property tax relief to be proportional to the size of the property tax bill.
Regarding the school payback, he said the governor appears to be operating on the premise that it might be better to provide schools with additional funding now and pay them back the money that was borrowed over the next few years.
“I haven’t come to a firm conclusion on that,” he said.
Sen. Carrie Ruud, R-Breezy Point, said she was not impressed with what she termed the largest tax increase ever proposed by a Minnesota governor. She described the extension of the sales tax to clothing as anti-family and also a move that would hurt the tourism draw of the Mall of America.
“I don’t think this plays well,” she said. “I think this really is anti-family. Every time a family turns around they’re being taxed.”
Ruud, who is starting her second, non-consecutive term in the Senate, said she wants to see spending reductions and noted that Dayton’s plan does not pay back the money that was earlier shifted away from the school districts.
“Greater Minnesota legislators need to stick together on the budget,” she said. “I think the majority party (the DFL) needs to be careful they don’t overreach.”
Rep. Ron Kresha, R-Little Falls, said he was most disappointed by the lack of equity in financing for K-12 education.
“I was hoping we were going to address the disparity between the rural areas and the metro,” he said.
The freshman legislator also noted that transitional dollars for the Long Prairie School District would be lowered by about $9 per pupil. He said the district needs money for secondary language related to integration issues.
Rep. Tom Anzelc, DFL-Balsam Township (Itasca County), said Dayton has put forward a progressive document that deals with the problems that property taxes cause northern Minnesota residents, resorts and businesses.
“I think it’s a northern Minnesota-friendly budget proposal,” he said. “I think it’s encouraging for counties, encouraging for school districts. If you believe, like I do, that property taxes don’t work well in northern Minnesota — it’s good for us.”
He said the slightest blip in property taxes causes shock waves because of the lower value of land in northern Minnesota.
“I think the end product is going to be reductions in the dependence on the property tax,” Anzelc said. “I think the Legislature is going to reluctantly accept the notion that the wealthy high income wage earner will have to pay a little bit more income.”
Admitting that parts of the Dayton package will be a hard sell, the District 5B representative said he’ll strongly suggest to his leadership in the House that they allow enough time for representatives to go back to their districts and conduct town meetings on the tax package. (District 5B includes portions of both Itasca and Cass counties.)
He said he talked to school superintendents who wanted a payback plan they can count on and some said they would accept more money in the funding formula instead of a quicker pay-back.
Rep. Mark Anderson, R-East Gull Lake, said the $500 property tax rebate tells him citizens were being overcharged in the first place.
“Taxes are going up and spending is going up,” he said.
The freshman lawmaker from District 9A (which includes parts of Todd, Wadena and Cass counties) said middle class people should be storming the Capitol over the extension of the sales tax to clothing.
“As a minority all we’ll be able to do is voice our opinions.”