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Senate DFL proposes more than $1 billion in new taxes
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"We can't balance our budget in an unbalanced way," said Senate Majority Leader John Hottinger, DFL-St. Peter, who added that the budget proposal "recognizes the importance of the common good." (MPR Photo/Michael Khoo)
Senate Democrats are proposing more than a billion dollars in tax increases to help balance the state's budget shortfall. The plan is a direct challenge to Gov. Tim Pawlenty, who has pledged not to boost state taxes in order to erase a projected $4.2 billion deficit. Pawlenty and House Republicans have called the DFL package "dead on arrival," but Democrats say it's clear that state government will need new revenues in some form to weather the fiscal crisis.

St. Paul, Minn. — The Senate budget plan would boost the cigarette tax by $1 a pack, raising more than $500 million. DFLers are also proposing a new income tax bracket for the state's wealthiest citizens. The tax would hit couples making more than $250,000 or single filers earning more than $135,000.

The plan also calls for a repeal of unspecified corporate tax exemptions. Together, the items would raise more than a $1 billion.

Senate Majority Leader John Hottinger says a series of statewide town meetings convinced Democrats that Minnesotans aren't prepared for the spending reductions necessary in Governor Pawlenty's budget.

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Image "Class warfare at its best," says Sviggum

"Gov. Pawlenty just doesn't get it. His budget costs real Minnesotans," Hottinger said. "It focuses too much of the budget fix on seniors who built this great state, on children who seek the opportunity to succeed, on those Minnesotans who face disabilities and live from paycheck to paycheck."

Hottinger says the new revenues would cushion the cuts proposed in Pawlenty's budget. The governor's plan would reduce spending on health and human services, trim funding for higher education, and slash state assistance to cities and counties.

But the governor is quick to point out that, even with the reductions in planned spending, the budget will still increase over the last cycle. And Pawlenty says DFLers should recognize sooner rather than later that tax increases are off the table.

"We're not going to do it now. We're not going to do it in May. We're not going to do it in June. We're not going to do it. And so they need to get that message. The DFL needs to get the message that we are not raising taxes in Minnesota this session," Pawlenty said.

It isn't going to work and we're going to have a special session. Trust me. We're going to have a special session.
- Sen. Dick Day, R-Owatonna

House Republicans were quick to provide their support to Pawlenty. Speaker Steve Sviggum says the DFL plan was neither surprising nor original. "Our expectations to the Democrats were that they would raise taxes, that they would shift money, that they would spend more, and that they would enter into class warfare. That was our expectations for Democrats. And lo and behold, they met our expectations. They did exactly what you would expect they would do," Sviggum said.

House GOP lawmakers have prepared a budget that closely mirrors Pawlenty's roadmap, although the House plan captures new revenues by opening a state-run casino at the Canterbury Park racetrack in Shakopee. The state is expected to net $100 million over the next two years from that proposal, which Pawlenty has opposed.

Democrats, however, say the so-called "Racino" proposal is an indirect acknowledgement that the state needs new revenues. Assistant Senate Majority Leader Ann Rest of New Hope says various Republican plans already contain tax increases. Rest says that indicates the debate is no longer over whether taxes should be raised.

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Image Gov. Tim Pawlenty

"This is a debate about which taxes," she said. "Republicans have agreed revenues must be raised to help balance the budget. Our proposal does so fairly and tells Minnesotans exactly what it will cost."

In addition to the Racino plan, individual Republicans have proposed increasing car license tab fees and swapping higher cigarette taxes for lower surcharges on hospital and physician fees. Those proposals don't necessarily have the support of the governor or GOP leaders. In fact, the tab fee hike has already been rejected by key policymakers.

Pawlenty and House Republicans congratulated Democrats on producing a proposal, even if they dismissed the contents. GOP Senate Minority Leader Dick Day says lawmakers should prepare for overtime.

"I'm just saying it isn't going to work and we're going to have a special session. Trust me. We're going to have a special session. Because if they're dug in and they want to actually spend billions of dollars more when we're all trying to downscale government, we're trying to move government down?" Day said.

Day says he's pleased to see a Democrat alternative, but he says the tax hike complicates rather than facilitates discussion.

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