Dayton administration tries to soothe business fears as DFL readies tax bills

Gov. Mark Dayton
Gov. Mark Dayton, pictured on Tuesday, Nov. 6, 2012, at Saint Paul RiverCentre. Dayton has called repeatedly for higher income taxes for the state's top earners. The governor has not yet released his budget so it is unclear exactly what he is proposing. The governor must release his budget plan by Jan. 22.
Anthony Kwan for MPR

Democrats in the Minnesota Senate intend to discuss their top priorities for the 2013 legislative session today.

Several of the bills — which change the state's tax structure and raises the minimum wage — they will propose have garnered attention from state's business community, which gathered Wednesday evening at an annual session kickoff dinner hosted by the Minnesota Chamber of Commerce.

Top aide to Gov. Mark Dayton, Chief of Staff Tina Smith urged business leaders to work with the governor to fix the state's long-term budget problems. She took the podium on the governor's behalf. Dayton canceled his appearance because of recent back surgery.

Smith worked to calm a mostly anti-tax audience leery of what her boss and a new DFL majority will do in the upcoming session.

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"We are not here tonight as 'sore winners.' I believe you're going to find that we want what you want: a Minnesota that is the envy of the world, in terms of its competitiveness, in quality of life and the excellence of its public sector," Smith said.

Smith touched on Dayton's work with business leaders and touted his decision to speed up permit applications, commitment to improve government services and focus on workforce training, transportation and early childhood education.

But Smith also warned that the business leaders would not necessarily like some of Dayton's policies, specifically his call for a tax increase.

"We need to 'talk turkey' here. We cannot make progress if we do not first, honestly and forthrightly, acknowledge the budget challenges that we face," Smith said. "The governor says frequently that the state budget is a reflection of our values, but it's also about the math."

"We cannot make progress if we do not first, honestly and forthrightly, acknowledge the budget challenges that we face."

Dayton has not released his budget yet so it is unclear exactly what he is proposing. He has called repeatedly for higher income taxes for the state's top earners. Dayton has to release his budget plan by Jan. 22.

Before the dinner, several business leaders talked about the bills being introduced in the Minnesota Senate. Nineteen of those bills appeared on the Senate's website Wednesday night.

One bill increases the minimum wage. Another cuts the overall sales tax rate but expands the tax to some clothing sales. Other bills eliminate a tax break for corporations that operate overseas and collect sales taxes on some Internet purchases. Most are red flags for some business leaders.

"Every one of these people ran on jobs and the economy and those bills you started with send a different message," said David Olson, president of the Minnesota Chamber of Commerce. Olson said he understands that the governor and the DFL-controlled Legislature campaigned on fixing the budget, but worries their approach will hurt the state's business climate.

"We knew that there was going to be some pent-up demand on some things. Our job is to point out to the Legislature the impact that these decisions will have on the economy," Olson said. "If you raise the minimum wage to an excessive amount that's out of line with everyone else, we're going to have fewer jobs."

DFL Sen, Rod Skoe of Clearbrook said no one should get too worked up about the tax-related bills that were introduced. Skoe, who chairs the Senate Taxes Committee, said he personally does not support expanding sales tax to clothing but believes everything should be considered as lawmakers aim to balance the budget.

"How we get there? That's what the legislative session is for. We're running through all of these options and hopefully we'll come out with the best one in the end," Skoe said. "I expect the governor's proposal to bring some fairness to the tax code, so we're going to take a look at that obviously."

Republican Senate Minority Leader David Hann said it is unlikely Republicans will be able to prevent Democrats from passing their tax plans, but he warned there could be consequences for them if they overreach.

"We can't stop anything in the Legislature, but I don't know how many of these new Democrats representing districts that were held by Republicans two years ago are going to sign on to tax increases that we've at least heard rumors about," Hann said.