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$2 billion tax bill heads to passage, bonding remains uncertain

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By Don Davis

Forum News Service

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ST. PAUL -- The keystone of Minnesota Democrats’ budget plans, $2 billion in tax increases, was headed for final legislative passage late Sunday while a public works bill remained in doubt as time runs out in the 2013 legislative session.

The tax increases are for plugging a $627 million state budget deficit and giving more money to Democratic priorities such as education.

Provisions include raising income taxes on Minnesota couples with $250,000 or more taxable income and individuals making at least $150,000. Also in the bill are higher cigarette taxes, new sales taxes businesses must pay and $400 million worth of what Democrats say will be property tax relief.

Tax debate continued late Sunday with little doubt that the bill would pass with heavy Democratic support and Republican opposition. The debate started 28 hours before the Legislature must adjourn this midnight.

Several smaller bills remained unfinished, including the “legacy bill” that would fund outdoor and arts projects throughout the state with money from a sales tax increase voters approved in 2008.

Between other issues, representatives debated a bill to allow childcare workers and personal care attendants to join unions. The off-and-on debate was expected to continue through much of today.

Southwestern Minnesota lawmakers worried about $1.5 million they seek to leverage federal funds to recover from last month’s late winter storm.

Rep. Rod Hamilton, R-Mountain Lake, said he is angry disaster relief funding was included in an $800 million bonding bill rather than in its own bill.

Hamilton said the issue should be beyond politics and most or all members likely would support it as its own bill.

One of the main legislative questions was whether a public works bill would be forthcoming after the House defeated by five votes an $800 million one last week.

Supporters of renovating the state Capitol, the largest public works project proposed, thought nature was on their side during a heavy Sunday St. Paul thunderstorm.

A Capitol basement hallway flooded, prompting a Capitol maintenance crew to spring into action and remove the water. The incident increased public works discussion.

“Due to the current condition of the Capitol, the rain is coming through the panels and flooding the tunnel,” Rep. Dean Urdahl, R-Grove City, announced to the full House.

Nature’s intervention may not be enough to revive the public works bill. Republicans said on Sunday night that Democrats have not negotiated the bill with them.

With hours left to work this year, House Minority Leader Kurt Daudt, R-Crown, said he had only had a “high-level ... brief, initial conversation” about public works. A Senate Republican spokesman said Senate Capital Investment Chairman LeRoy Stumpf, DFL-Plummer, has only made preliminary “inquiries” of GOP leaders on the subject.

Some Republican votes are needed to pass a public works bill, to be funded by the state selling bonds.

Senate Majority Leader Tom Bakk, DFL-Cook, said he would propose a $300 million public works bill, with most money destined for the Capitol.

Bakk said that besides Capitol renovation, he would include a new Minneapolis Veterans’ Home facility, wastewater projects around Minnesota and local road and bridge funding.

Two-thirds of the funds in the Bakk plan would go to the Capitol.

The tax plan includes $400 million that Democrats say will go to lowering property taxes, or at least reducing the speed they have been rising.

Aid the state provides cities and counties would rise in the tax plan. Although there is nothing in the bill requiring that the money be used to lower taxes, lawmakers said they expect that to happen.

Senators resurrected a version of a business sales tax that Dayton earlier abandoned. It will require businesses to pay sales tax on electronics purchases and warehousing services.

Raising taxes on top earners will bring in $1.1 billion; closing what some see as corporate tax loopholes, $400 million; raising tobacco taxes, $430 million; and reforming the estate tax, $80 million.

The new higher tier income tax will be 9.85 percent, up 2 percentage points from the current rate. It would affect 54,400 taxpayers.

Other provisions in the tax bill include:

-- About 300,000 homeowners should receive higher property tax refunds and 100,000 who have not received refunds in the past will get them now.

-- Nearly 1 million Minnesotans should get a newly created homestead credit refund, renters credit and increased city and county aid.

-- Local Government Aid payments to cities will be decided by a new formula giving more suburbs aid and lowering some in rural areas.

-- Rochester will get about $400 million to improve infrastructure as the Mayo Clinic works on a $3 billion expansion.

-- Bloomington gets tax breaks for a Mall of America expansion, Maplewood for 3M expansion, Shakopee for a manufacturer and Brooklyn Park for Baxter drug company moving to the city.

-- The cigarette tax will increase $1.60 per pack as a backup for Vikings stadium construction funds.

-- Sales tax must be paid to online retailers with a presence in Minnesota.

Reporter Danielle Killey contributed to this story.

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