ST. PAUL —
Dayton tried a new tack this year with a proposal to raise billions of dollars in new taxes that he argues would add stability to the budget. But it has stirred fierce opposition from conservatives and business leaders, who say it would make the state less competitive. A stream of backers and opponents to the Dayton plan paraded before the House Tax Committee on Wednesday night to weigh in on the debate.
The proposal would impose a new income tax rate for couples on taxable income above $250,000, hike taxes on cigarettes and rental cars, charge higher taxes to Minnesota corporations with overseas earnings and demand tax payments from “snowbirds” who spend most of their year living in another state. But the most controversial aspect is his bid to broaden the state sales tax to services such as haircuts and legal bills, and to clothing purchases that exceed $100.
Dayton has also suggested lowering the sales tax rate from 6.875 percent to 5.5 percent, cutting the basic corporate tax rate, freezing business property taxes, cutting unemployment taxes paid by companies and giving all homeowners a $500 property tax rebate.
The net effect would add more than $2 billion in new revenue to the state coffers — half of which would go toward erasing the deficit and the rest toward new spending on education, economic development programs and other priorities.
Sen. Dave Thompson, R-Lakeville, said the state’s improving budget situation vindicates the Republicans’ insistence on not raising state taxes when his party led the Legislature in 2011-2012.
“It would be terribly unfortunate if this governor were to follow through on these draconian tax increases on every Minnesotan and send us back into a downward spiral,” Thompson said.
Earlier this month, the governor invited lawmakers to tinker with his plan.
“As I see it, we have three basic budget options. Plan A is the one I have proposed, or something close to it. Plan B is to stick with our current tax structure, or something close to it. Plan C is something better,” Dayton told a joint session of the Legislature. “No one would be happier than me to see a good Plan C. I’m still looking and I’m sure listening.”
Whatever the moniker, work on the alternative plan begins in earnest with the budget forecast.