A major overhaul of state tax policy could be in the works next year when the newly elected DFL Legislature arrives at the Capitol.
Gov. Mark Dayton is expected to launch the discussion in January when he unveils his plan for making the tax system fairer and simpler. But Dayton's long-promised income tax increase on top earners could be a tough sell, even with Democrats now in control of the House and Senate.
The governor's point man on taxes, Revenue Commissioner Myron Frans, has been traveling the state to highlight problems in the current system and collect suggestions about ways to improve it. He has made 140 presentations in 48 cities over the past year.
Frans said that almost everyone he talked to believes the tax code is out of date, and they are particularly concerned that property taxes are too high.
"As I've been taking the three-legged stool around to describe the three major sources of revenue -- the property tax, the sales tax and income tax -- people are concerned that the property tax leg now makes up about 40 percent of the three different major sources of revenue," Frans said. "They believe that's too much, and it's something we need to address."
“Anytime someone says 'tax fairness,' that means increased taxes on everyone.”GOP Rep. Greg Davids of Preston
Frans said a comprehensive approach to tax reform would also include a recalibration and broadening of the sales tax. In addition, he said, Dayton still wants every Minnesotan paying his or her fair share of income taxes. That proposal, which first surfaced in the 2010 campaign, would target the wealthiest 2 percent for an increase.
"We're looking at it and trying to figure out the best way to do that," Frans said. "But it's obviously a conviction he has that he thinks we should address. And it clearly would make the overall Minnesota state tax system more fair by equalizing the amount of money that everyone pays in state and local taxes."
He said specifics of Dayton's proposal will come out along with the governor's budget proposal in mid-January.
DFL Sen. Rod Skoe of Clearbrook, the new chairman of the Senate Tax Committee, is curious about those specifics and said he is also interested in bringing greater balance to the tax system.
But when it comes to income taxes, Skoe emphasized that the governor's proposal will be just one of many on the table.
"The governor is one person. So he can put forward his idea, and that's what it is," Skoe said. "Where the Legislature, we're a much larger, more diverse group of people. We've got to have 34 votes to pass a bill off the Senate floor. So we're going to include a wider range of ideas and areas of interest than maybe the governor might."
The incoming House Tax Committee chairwoman, DFL Rep. Ann Lenczewski of Bloomington, said she expects to take a long look at the governor's income tax proposal as part of the broader discussion. Lenczewski said getting the votes needed for any tax changes will be a challenge but said she hopes for a bipartisan tax bill.
"I would hate to think Democrats would view the confluence of the majorities with the governor's office as an OK to not work with Republicans and all Minnesotans," she said. "So, hopefully the conversation will be inclusive and varied. That means there will be strong disagreement, and that's OK."
One Republican rejected the DFL tax plan even before it took shape.
"Well, anytime someone says 'tax fairness,' that means increased taxes on everyone, and that's exactly what the proposal will be," said GOP Rep. Greg Davids of Preston, who chaired the House Tax Committee the past two years.
Davids said he thought Dayton will try to enact all the tax changes he could not achieve when the GOP controlled the House and Senate. He also said he thought Frans' travels were intended to prepare Minnesotans for a tax increase.
"And it will be for everyone. This talk about the top 2 percent is nonsense," Davids said. "That doesn't raise any revenues. For what the governor wants to do, he'll have to go after the middle class, and that's exactly what he'll do."
Davids said he was pessimistic about Democrats now in charge at the Capitol. It's an arrangement he has not encountered in his 10 nonconsecutive House terms. But Davids also predicted that a DFL overreach on taxes could help swing the House back to Republican control in two years.