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Tax hike for rich in House plan

Reps. David Dill of Crane Lake, left, and Morrie Lanning of Moorhead share a laugh Monday before the Minnesota House Taxes Committee began debating a bill to raise taxes. Stacks of the bill are also seen. Tribune photo by Don Davis

ST. PAUL -- Minnesota House Democrats propose increasing taxes on rich Minnesotans, smokers, drinkers, businesses that recently moved to Minnesota and youths downloading Internet music.

House Tax Chairwoman Ann Lenczewski, DFL-Bloomington, said the bill is the biggest tax-reform measure in 20 years. She said it eliminates tax laws the state no longer can afford, items not fair and what is not working.

Republicans, however, said the bill introduced Monday is little more than a tax increase for most Minnesotans.

The House measure, written by Democrats who control the chamber, raises $1.5 billion for the next two-year state budget.

A bill to be unveiled today by Senate Democrats would raise taxes $2 billion. It is not expected to include alcohol or tobacco tax increases, like the House plan, but may affect lower income Minnesotans than the House.

Republican Gov. Tim Pawlenty says he will not consider a state tax increase, but he would borrow $1 billion to help run the state.

Minnesota faces a $4.6 billion deficit in a budget that likely will spend more than $33 billion for the two years beginning July 1.

House Minority Leader Marty Seifert, R-Marshall, said the Democratic tax plan would hurt businesses and hinder job creation.

Lenczewski said the bill features "bold reform" that is acceptable because of the big budget problem. "Let's not waste the deficit."

The tax leader said among those reforms are eliminations of several tax breaks that mostly wealthy Minnesotans receive.

Lenczewski's bill would raise $468 million in the next two years by raising income taxes on Minnesota couples who earn at least $300,000 a year. Lenczewski said the richest Minnesotans now pay the lowest tax rate.

The proposal would increase taxes on many alcoholic drinks by 3 cents to 5 cents per drink, raising $42 million.

Tobacco taxes also would go up; cigarettes, for instance, would be taxed 54 cents per pack of 20 cigarettes more than under current law. Total state taxes would be $1.77 per pack, with federal taxes also going up.

Higher tobacco taxes would bring the state $187 million.

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.