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Minnesota governor promotes tax agenda and spending plan

Gov. Mark Dayton on Wednesday delivers his third Minnesota State of the State address. He told lawmakers that “we have reparied much of the fiscal damage we inherited.” Forum News Service photo by Don Davis

ST. PAUL — Minnesota is doing better than most neighboring states, Gov. Mark Dayton said Wednesday.

And it is doing better than two years ago, he added.

“Minnesota’s job growth in 2012 was the 12th best among all 50 states; and we outperformed three of our four neighbors,” Dayton said during a 48-minute speech that was politely received by lawmakers. “Iowa ranked 30th best; South Dakota was 44th.”

He continued a rivalry with Wisconsin Gov. Scott Walker, saying Wisconsin “helped bring up the rear at 42nd. And, help spread the word across the St. Croix, their unemployment rate last month was 20 percent higher than ours, while our per capita income was 12 percent higher than theirs.”

Dayton added that only North Dakota led Minnesota in the region, with an oil-fueled job growth that led the country.

Overall, Dayton told legislators Wednesday in his third State of the State address that state leaders must attack Minnesota’s problems head on.

“We can choose, as others in our positions have before us, to ignore these growing problems, avoid fixing them and hope they don’t crash down upon us while we’re in office,” Dayton said in remarks prepared for his third State of the State speech. “Or we can lead. That is what the people of Minnesota elected us to do.”

Dayton’s speech centered on promoting his higher-taxes and higher-spending budget proposal. It came in front of a Legislature with a Republican minority that does not like what he proposes and a Democratic majority that has yet to offer its full support.

The governor praised the state’s agriculture efforts, saying ag commodity exports rose 13 percent last year. He also singled out education achievements, touting higher math and reading scores.

Most of his time, however, was spent on money matters. Republican leaders agreed that things are better, but they took credit for improvements when they controlled the Legislature the last two years, before Democrats took House and Senate control last month.

They were especially harsh on Dayton’s wish to raise some taxes.

“This prescription of new taxes, taxes on everybody, is not warranted,” Senate Minority Leader David Hann, R-Eden Prairie, said. “We need to hold our spending in line with revenues.”

Even though Dayton says only the 2 percent highest earning Minnesotans would be taxed more, lawmakers have plenty of questions about how his proposal will affect the middle class.

The governor promoted his call to raise taxes on the rich, charge sales taxes on services and some goods that have not been taxed and to lower the sales tax rate.

“In the decade after Minnesota’s income tax reductions, our economy fared worse than the nation and most other states,” Dayton said. “And at both the federal and state level, big tax cuts followed by serious recessions produced large budget deficits, which threaten our current fiscal strength and future economic prosperity.”

Dayton said the state has fixed most of its fiscal woes, but more work is needed.

His budget plan would plug a $1.1 billion deficit, but the state still would owe schools that amount.

“My budget ... would lift us out of this miserable deficit-to-deficit cycle,” he said.

One non-money matter he brought up was what he sees as a need to allow gay marriages. Even though voters defeated a constitutional amendment to ban gay marriages last November, state law still does not allow same-sex couples to wed.

“I want Minnesota to be a state which affirms that freedom for one means freedom for everyone, and where no one is told that it is illegal to marry the person you love,” he said.

Republican said this probably is not the time for such a change. House GOP Leader Kurt Daudt, R-Crown, said it is time to focus on the budget and creating jobs, not social issues.

Dayton’s proposed two-year budget would spend nearly $38 billion and bring in more than $3 billion in new taxes.

The plan released last month includes more spending for education and jobs programs while erasing a $1.1 billion state deficit. Dayton also proposes a series of tax changes.

Public schools would get more general funding and for special education programs.

The plan also would reduce the sales tax rate from 6.875 percent to 5.5 percent but expand what is taxed to include most services, such as haircuts and auto repairs and those businesses provide to other businesses. Clothing items that cost more than $100 also would be taxed.

Danielle Killey contributed to this story.

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