Dayton sticks to guns on income tax hike on top earners

In a vigorous response to critics of his budget proposals, Gov. Mark Dayton told business leaders Wednesday that he would continue to push for an income tax increase on top earners.

During an often confrontational speech to the Minnesota Chamber of Commerce, Dayton said the group is misleading its members about taxes and state spending.

Last week, Dayton announced that he was dropping his proposal to expand the sales tax to business and consumer services. That part of his budget was the biggest target of the business community.

But Dayton has no plans to capitulate on his proposal to raise income taxes on top earners to erase the state's projected $627 million deficit and provide more money for education. He also dismissed concerns by Chamber of Commerce representatives that higher income taxes would force businesses to move to other states.

"You can't govern by anecdote," Dayton said. "I care about every one of those businesses. I care about every one of those decisions. If someone is going to go elsewhere, that's of concern to me, but I'm looking at the whole picture and what's best for Minnesotans.

"If you think it's going to be better for your kids and my kids and grandkids for us to keep cutting education funding, it just isn't going to be that way in my view," the governor said. "It's not going to turn out that way."

Dayton also called on business officials to back up their claims on taxes and spending with facts. The first part of his speech included a litany of statistics designed to show that Minnesota has cut government spending over the past two decades. He also argued that states with the lowest taxes have the lowest personal income and job growth. Dayton said Chamber lobbyists who want spending cuts should provide specifics.

"Nobody in the state of Minnesota during the last two months has taken me up on my request on ideas where we can cut spending," he said. "Specifically, tell us where, tell us how. I'm all ears. But you can't just bandy around the word reform like a slogan. It's got to be something real."

Dayton also suggested that the Chamber of Commerce was criticizing him because he's a Democrat. He said Chamber officials rarely, if ever, publicly criticized former Republican Gov. Tim Pawlenty for not enacting spending reforms during his time in office.

During the question and answer period, several people in the audience complained about Dayton's plan to raise income taxes on top earners. One audience member, who identified himself as an owner of a construction firm, said he and others would be hit by higher income taxes.

The person, who didn't give his name and could not be contacted after the event, complained that the income tax hike would unfairly target small businesses.

"Many people think that the 2 percenters are the Warren Buffetts of the world," he said. "I think if you take our population times 2 percent that that's small business."

Dayton thanked for the person for his work but countered that the Department of Revenue found that only 6 percent of small business owners would pay higher income taxes under his plan.

Minnesota Chamber of Commerce President David Olson took issue with several of Dayton's claims. He said the chamber has been calling for spending cuts for the past 10 years. Olson said the Chamber will not support a tax increase of any kind to erase the state's projected budget deficit.

"We think the reforms that the governor and the Legislature made over the past two years are working," Olson said. "We've seen revenues increase. We think $627 million in a $37 billion overall budget is a workable number and we're going to work on the spending side of that equation."

Dayton also provided more specifics on his revised budget plan, which he plans to release Thursday. He said his proposal to cut the corporate tax rate will not happen but he will continue to push for increasing taxes on corporations that operate overseas.

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