Horner outlines budget plan: Taxes, cuts, delays

Independence Party gubernatorial candidate Tom Horner has unveiled a financial blueprint to address Minnesota's $5.8 billion projected budget shortfall.

Horner proposes lowering -- but expanding -- the sales tax, and raising taxes on alcohol and tobacco. He would also freeze state hiring and cut $2.5 billion in spending.

As Horner laid out his list of solutions to Minnesota's budget imbalance Monday afternoon, he repeatedly acknowledged fixing the problem will not be pleasant. But he said the candidates for governor owe voters concrete proposals.

"What we need this year, more than any other year, is a campaign in which we're honest with Minnesotans, in which we say to Minnesota, 'Democrats, Republicans have dug the hole so deep that it's going to take while for us to climb out of it,'" Horner said. "Here's a way for us to climb out of it."

Horner said he thinks more than one-third of the $6 billion shortfall could be addressed through spending cuts. He would freeze state hiring and eliminate some programs -- most notably state funding to counties.

Horner would also raise money by reducing the sales tax rate by 1 percentage point, to 5.875 pecent. He would also expand the sales tax to other goods that are not taxed now -- such as clothing and as-yet-unspecified personal services. Horner said that could bring in $1.4 billion per biennium.

Horner said the sales tax approach makes more sense than Democratic gubernatorial nominee Mark Dayton's proposal to increase income taxes on wealthy Minnesotans.

"The wealthy buy more. The wealthy will pay a greater share of the sales tax. They will pay it whether they live here 12 months out of the year, or five months and 29 days," said Horner. "The other advantage of the sales tax is that it also brings in revenue from non-Minnesotans, but the wealthy will pay more."

Horner would also nearly double the $1.50-per-pack cigarette tax, and he would increase alcohol taxes to 10 cents per drink in bars and restaurants. That would raise another $600 million, he said.

Among Horner's proposed cuts would be state funding to counties. In return, Horner would allow counties to raise taxes half a percent. He would also cut state mandates on local governments.

Horner would continue to delay $1.8 billion in school funding until 2013. But he would create a state fund to cover school district interest expenses.

In addition to raising some taxes, Horner would reduce taxes on businesses, with a goal toward phasing out Minnesota's corporate income tax.

Horner said he would also authorize casino gambling at the state's two horse tracks to raise money for a new Vikings stadium, a state budget reserve, natural disaster relief and funds that would "assist in startup costs and promote innovation."

Dayton issued a short written response to Horner's plan, saying Horner and Republican gubernatorial nominee Tom Emmer believe Minnesota millionaires should not pay more personal income taxes, and that everyone else is Minnesota should pay higher taxes instead.

Emmer campaign manager Cullen Sheehan said the governmental redesign elements of Horner's plan sound similar to things Emmer has been calling for. But increasing any taxes, Sheehan said, is not the way to go.

"There's not a revenue problem, there's a spending problem. "We need to do first things first and get our hands around that, and then address longer term issues," Sheehan said.

Mark Havemen, executive director of the Minnesota Taxpayers Association, said Minnesota's tax system needs reform to reflect changes in demographics and the way people spend money. The non-partisan organization has analyzed state tax policy for more than 80 years.

Unlike the Taxpayer's League, the group behind the "no new taxes" pledge, the Taxpayer's Association does not endorse candidates.

Havemen said if taxes need to be increased, expanding the sales tax probably makes more sense than other options.

"It's probably the area where the state of Minnesota has the most maneuverability. If you look at our personal income tax rates, they're certainly high relative to the national average," he said. "If you look at the sales tax rate itself, it's high relative to the national average; our corporate income tax is certainly high relative to the national average. The one area where we possibly have some headroom to maneuver is in the base of the sales tax."

Horner's tax plan will likely come up Tuesday morning, when the three candidates meet for their next forum at the University of St. Thomas.

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