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Minnesota House OKs $2 billion tax bill, Senate backs Capitol repair

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ST. PAUL - The keystone of Minnesota Democrats’ budget plans, $2 billion in tax increases, won House approval early today and the Senate pulled a surprise in the early morning hours by approving money to fund state Capitol building renovations.

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Faced with a midnight constitutional deadline to adjourn for the year, Republicans and Democrats began working together overnight to find a way to neatly end the contentious session.

Senators planned to take up the tax bill today, but have dropped plans to approve an anti-bullying bill to affect school-age children.

They also passed a proposed constitutional amendment by Sen. Kent Eken, DFL-Twin Valley, to ask voters to establish a council to set legislative pay. The House already passed the measure.

The Eken constitutional amendment passed the Senate 43-23 hours after senators passed another bill to allow statewide officials to receive raises, but not legislators.

In the House, members debated a bill to allow some childcare workers and personal care attendants, who tend to the elderly and disabled, to join unions. That debate was fit in between discussing budget and tax bills.

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.

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 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.

There was no immediate agreement between the House and Senate on the Capitol renovation bill senators approved unanimously, leaving it unclear if the House would accept the Senate plan.

Senators approved the bill hours after Senate Majority Leader Tom Bakk, DFL-Cook, said he planned a much larger bill that included more money for the Capitol as well as a handful of other projects.

The Senate-passed measure provides $132 million for Capitol renovation and a new Capitol complex parking ramp.

Some of the renovation work has been completed and scaffolding covers the northeast corner of the Capitol as workers repair exterior walls, which have lost chunks of marble in recent years.

The tax increases representatives passed are for plugging a $627 million state budget deficit and giving more money to Democratic priorities such as education. There was little doubt the tax measure would pass the Senate today as it did the House on a 69-65 vote.

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.

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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Don Davis
Don Davis has been the Forum Communications Minnesota Capitol Bureau chief since 2001, covering state government and politics for two dozen newspapers in the state. Don also blogs at Capital Chatter on Areavoices.
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