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Tax plan lands with thud at Minnesota Capitol
by Laura McCallum, Minnesota Public Radio
May 5, 2005

Gov. Tim Pawlenty called the tax bill "profoundly stupid." (MPR Photo/Laura McCallum)

Gov. Tim Pawlenty on Thursday blasted a Senate DFL plan to raise taxes on upper-income Minnesotans. The Senate tax bill would create a temporary 11-percent top income-tax rate. Senate Democrats who support the plan say it asks Minnesotans who benefitted from the economic boom of the '90s to help balance the budget. But not all Senate Democrats back the plan.

St. Paul, Minn. — About 42,000 upper-income Minnesotans would pay higher income taxes under the Senate tax bill. The new rate would affect single filers who make more than $166,000 a year, and married taxpayers who make more than $250,000 annually.

Republican leaders immediately dismissed the plan.

"It is profoundly stupid," said Gov. Pawlenty, who added the proposed top bracket would be the highest rate in the country, and would stifle job creation.

"Most of our businesses in Minnesota pay taxes at the individual income tax rate. And so this increase will hit right square in the face our job providers and job creators in Minnesota, particularly our small and medium-sized businesses," he said.

The chairman of the Senate Taxes Committee disagrees. Minneapolis DFLer Larry Pogemiller says money from the additional taxes would be dedicated to education -- both K-12 schools and higher education -- which helps produce a stronger workforce.

"I don't think it hurts jobs to invest in the University of Minnesota. I think that helps jobs," he said.

Pogemiller says Minnesotans who benefitted the most from the tax cuts of 1999 and 2000 should contribute more to help the state regain financial stability.

DFL Senate Majority Leader Dean Johnson of Willmar says many Minnesotans support a tax increase if it's earmarked for education. He pointed to a stack of letters about a foot high from citizens who want the Legislature to increase taxes to pay for schools.

"Senate Democrats are proposing to raise taxes for our children and our grandchildren," he said.

But Johnson wouldn't say whether he would vote for the Pogemiller tax bill, and at least one high-ranking Senate Democrat is opposed to it.

Assistant Majority Leader Ann Rest of New Hope says paying for an increase in education funding shouldn't be limited to the wealthiest Minnesotans.

"It seems to me that every Minnesotan wants to step up to the plate, and that a fairer way of raising taxes is to let all of us contribute. A surcharge? Yes, I believe that that's the correct thing to do. But I want to pay it," she said.

Rest says she believes other Senate Democrats share her concerns. If Rest and two other Democrats vote against Pogemiller's bill, it won't pass.

Senate Minority Leader Dick Day of Owatonna says not one Senate Republican will vote for the tax bill.

"To spend four-and-a-half months to put together a plan that eliminates jobs and eliminates people to expand and get us out of this recession that we just are out of now and headed in the right direction; I don't understand it, but I will assure you, that no Republican state senators are going to help that type vision for this state," Day said.

The DFL Party responded to the GOP criticism by noting that under Pawlenty's watch, Minnesota's economy continues to lag behind the national average. New numbers released by the Pawlenty administration show that initial claims for unemployment benefits filed in April are up about 13 percent over the same period a year ago.

State officials cited temporary manufacturing layoffs, and said that permanent jobless claims are down.