Minnesota House approves tax plan
ST. PAUL — Minnesota Democrats and Republicans agree on at least one thing: The House tax plan raises a lot of money.
“It’s a large increase, but it has to happen,” said Rep. Erik Simonson, DFL-Duluth. “Somebody has to step up to the plate, be a leader and make the tough decisions, and that’s what we’re here to do.”
House members voted 69-64 Wednesday to approve a tax bill that Democrats say will fund key investments and Republicans say will hit everyone hard.
“I know this tax proposal is bad for all Minnesotans,” said Rep. Mary Franson, R-Alexandria. She and others said the bill will impact not only the rich, but everyone in Minnesota.
“Everyone will pay more for beer, for baseball cards, for cigarettes, for rental cars, and the list goes on and on,” said House Minority Leader Kurt Daudt, R-Crown.
Democrats said the tax bill will help the state fill in a projected $627 million deficit for the next two years, balance the budget, pay back money owed to schools and invest in priorities, such as education programs. It is expected to raise about $2.6 billion over two years.
“It’s OK to make some strategic investments,” Simonson said. “We can do that and still protect the middle class.”
The House bill would create a fourth tier rate of 8.49 percent for couples making more than $400,000 a year in taxable income and add a temporary surcharge on couples’ income more than $500,000.
“This is a tax on success,” said Rep. Greg Davids, R-Preston, a former tax committee chairman.
Democratic leaders said the tax changes will affect only top income earners and about 3.3 percent of businesses.
“We think this is a really fair approach,” said bill author Rep. Ann Lenczewski, DFL-Bloomington.
Many lawmakers raised concerns about a wholesale alcohol tax in the bill. Lenczewski called the tax “modest” and said it would cost consumers only 7 cents per drink. She also defended a $1.60-per-pack cigarette tax increase.
“These are discretionary purchases,” Lenczewski said. “Nobody has to buy them.”
Those fees specifically are targeted toward users rather than hitting the general public, she added.
The bill includes money to help the Mayo Clinic expand in Rochester. The state would put up to $327 million into the main project and other funding toward transit needs, while Rochester and Olmsted County are asked to contribute more than they originally proposed.
Rochester could increase its local sales tax, lodging tax or tax some entertainment events to help raise its portion.
Lenczewski said the overall tax plan offers “dramatic and permanent property tax relief” and makes positive changes to Local Government Aid.
Some Republicans argued that the taxes would push people and businesses out of Minnesota.
“We are encouraging people to leave and putting up a ‘closed for business’ sign on the borders of our state,” Franson said.
Rep. Steve Drazkowski, R-Mazeppa, and others said income tax bracket changes in the bill will cause many Minnesotans to pay more. But Lenczewski said reforms in the bill, such as conforming to federal tax standards, mean most taxpayers will not pay more and might see a slight decrease.
Democratic leaders said they are happy with their plan, which does not include provisions such as a tax on clothing found in the Senate proposal.
“We think ours is a strong tax bill,” said House Speaker Paul Thissen, DFL-Minneapolis.