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House Democrats seek $1.2 billion tax increase

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House Speaker Melissa Hortman
House Speaker Melissa Hortman and Minnesota House Democrats proposed a tax bill Monday that would raise $1.2 billion in new revenue, largely from big business.
Evan Frost | MPR News

Democrats in the Minnesota House proposed a tax bill Monday that would raise $1.2 billion in new revenue, largely from big business. DFL leaders stressed that the money is needed for education, health care and other new spending plans. But Senate Republicans oppose the tax increases and are digging in for the fight ahead.

House Speaker Melissa Hortman, DFL-Brooklyn Park, said public schools have been underfunded due to Republican-backed tax policies, including recent federal changes, that she believes favor the rich.

"Tax cuts for the wealthy and corporations have exploded income inequality, and our tax bill works to restore some fairness," she said.

The DFL proposal would create a new 3 percent tax on capital gains that exceed $500,000. It also takes aim at corporations that currently use overseas tax havens.

House taxes committee chair Rep. Paul Marquart, DFL-Dilworth, said the foreign profits would return to Minnesota to help pay for education, health care and public safety.

"We're very aggressive on this and we should be. We owe it to our residents to get those dollars that should be here in Minnesota, because when we're not bringing those tax dollars back to Minnesota, others pay more in taxes."

Many of those other Minnesotans would see tax reductions under the House DFL plan. It would expand the working family tax credit, raise the married standard deduction to match the new federal amount, adjust the tax on Social Security income and provide a variety of property tax reductions trough existing programs.

A key Republican lawmaker offered a harsh critique of the bill.

Sen. Roger Chamberlain
Sen. Roger Chamberlain, R-Lino Lakes, on the floor of the Senate in St. Paul in May 2012.
Jeffrey Thompson | MPR News 2012

"The House tax plan is disastrous and will lead to ruin in this state," said Sen. Roger Chamberlain, R- Lino Lakes, the chair of the Senate taxes committee.

Chamberlain said he believes the House plan would hurt business and the prospects for job growth. In addition, Chamberlain said the attempt to capture foreign profits would lead to a court fight.

"That repatriation money, if they try to tax that and grab it, there will be a lawsuit. It is unconstitutional. They do not know how much of that money is attributable to this state. The businesses have said so, and it will run more businesses out of this state."

Marquart insists the House proposal is legally sound because corporations would have an option on how the foreign profits are taxed. 

Marquart noted that a big share of the bill's revenue would come through aligning the state and federal tax codes, adjustments that were made last session but lost to a veto.

He said farmers, senior citizens, small businesses and working families would see significant tax cuts.

"And it's about real tax reform. That's what this is about," he said. "It's moving our state forward so that we can do those things we need to do."