DFL lawmakers aren't fully embracing Gov. Mark Dayton's budget plan announced Tuesday.
Committees in the Minnesota Legislature will start holding hearings Wednesday on the plan that overhauls the state's tax code, erases the projected budget deficit and increases spending by $1 billion.
Dayton's tax plan changes the state's tax system in dramatic ways. It raises income taxes on individuals who make more than $150,000 per year and couples who make more than 250,000. It hikes the tax on a pack of cigarettes by 94 cents. It also expands the sales tax to services and some clothing while it lowers the overall sales tax rate by 20 percent.
"I'm not out to raise anyone's taxes. I'm out to raise enough revenues to do what's right for Minnesota," Dayton said.
There are also tax cuts in Dayton's plan. He wants to cut the state's corporate tax rate and property taxes for everyone.
In total, the plan raises $2 billion in revenue. Roughly half would erase the state's projected budget deficit. The other half would go to new funding for schools, job creation programs and aid to cities and counties.
MORE BUDGET COVERAGE
• Story: Dayton's budget plan includes higher taxes, spending
• Details: Sales tax changes
• Highlights: Dayton's budget proposal
• Link: Read the entire budget
• Live Blog: Revisit live coverage
Dayton campaigned on raising income taxes only on top earners. He said he's keeping that pledge because most Minnesotans would see a shift only in how they pay their taxes, not in their overall tax burden.
"We're really going after reducing property taxes, while at the same time balancing a budget, while at the same time increasing expenditures in areas that I think are vital to the future of Minnesota," Dayton said. "I think it's a balanced approach. I think it's one that Minnesotans will see the benefits of despite all of the people who are going to come screaming now about how terrible it's going to be."
But Republicans say Dayton's plan would raise everyone's taxes. They say businesses would pass along any higher taxes that they see because of the new sales tax plan. Republican House Minority Leader Kurt Daudt said the governor's plan will undercut the state's economy.
"A more fitting title for the governor's budget would be that this budget is for a better Wisconsin because that's where Minnesota's jobs will go," Daudt said.
DFL legislative leaders called Dayton's budget plan bold and honest. But DFL House Speaker Paul Thissen said that the full package is unlikely to become law.
"No one should be under any illusions that this budget that was introduced today is going to be the budget that gets passed into law," Thissen said. "It will go through the legislative process and it's going to be part of many discussions both inside and outside the Capitol over the next couple of months."
DFL legislative leaders will now have to do the heavy lifting of passing a budget plan that meets Dayton's expectations and provides political protection for newly elected Democrats who helped them win majorities in both the House and Senate.
Those first-term Democrats are taking a wait and see approach to the plan. DFL Rep. Zach Dorholt of St. Cloud said he's still studying the plan but is happy it gives lawmakers flexibility when it comes to taxes.
"He gave the Legislature something to work with which is nice to see," said Dorholt, who won in a competitive district. "He didn't just say one way or another."
Sen. Melisa Franzen, DFL-Edina, said she likes Dayton's focus on cutting the corporate income tax and increased spending for education. But she doesn't like Dayton's proposal to increase income taxes or his plan to expand the sales tax to business services. Franzen also said she would have liked to see more than $225 million in spending cuts.
"It's a mixed bag," Franzen said. "I don't see where the real cuts are. I'd like to look into that and where are we saving money and where are we making the tough decisions and not just raising revenues just because we can?"
The governor has said those who want to cut more spending should say exactly what they would cut. He has said that his budget plan needs to stay together as a package, but he also acknowledged that it's the first word in a conversation that could take several months to complete.
The next word is likely to come in March when the next revenue forecast is released and lawmakers get a better sense of where the state's budget stands.
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