DFL advances tax bill

Talk about it

ST. PAUL — Democrats were poised to finalize a $1 billion tax increase Friday night, an alternative to larger hikes the House and Senate already approved.

And Gov. Tim Pawlenty was poised to immediately veto the measure, forcing budget talks to begin anew 10 days before the Legislature’s constitutional deadline to adjourn.

The House approved the new tax plan 86-45 after a nearly five-hour debate Friday afternoon and sent the bill to the Senate.

Lawmakers and Pawlenty have known since the 2009 legislative session began on Jan. 6 that they faced a $4.6 billion deficit as they prepare a two-year, $33 billion budget. However, so far they have not agreed on how to do that, and a Democratic leader hinted that the Legislature could attempt to override Pawlenty’s expected veto of the tax bill.

The new tax plan moved at warp speed Thursday and Friday as Democratic-Farmer-Labor Party leaders tacked it onto what normally is a routine bill making technical changes to tax laws. A newly formed House-Senate conference committee finished the work in the wee hours of Friday.

The bill would use the new tax money to fund public school education ($588 million), nursing homes and long-term care facilities ($288 million) and hospitals ($114 million).

“This bill is about preserving our Minnesota values,” House Majority Leader Tony Sertich, DFL-Chisholm, said of education and health-care funding.

Without the tax plan, some 12,000 teaching jobs and 15,000 hospital jobs could be lost around the state, Sertich warned. Also, hospitals stand to lose out on millions of dollars in state payments.

“Those are real numbers,” Sertich said of hospital payment cuts.

The bill ups taxes on couples earning more than $250,000 annually. Those highest-earning Minnesotans would pay 9 percent of their wages to the state. The new rate could be repealed in 2014, but Republicans said that was unlikely.

Taxes also would go up on alcoholic drinks, the first increase in 22 years. Plus, the bill would add a surtax to credit cards that charge customers more than 15 percent interest.

In a letter to legislative leaders, Pawlenty called the measure “hastily processed and ill considered.”

The governor asked leaders to get him the bill as soon as possible “so I can veto it immediately and leave a maximum number of days for better legislation to be considered and passed.” Lawmakers face a May 18 constitutional deadline to adjourn for the year.

While Pawlenty said Minnesotans do not want higher taxes, House Speaker Margaret Anderson Kelliher, DFL-Minneapolis, said the public has told lawmakers that health care and schools are their priorities, so Democrats who control the Legislature opted to fund them with new taxes.

Kelliher said Pawlenty’s budget plan would leave the state with a long-term debt because he proposes borrowing nearly $1 billion for the next two-year budget, paying it back over 20 years.

The speaker, who some predict will run for governor, was as harsh with Pawlenty as she has been in public.

“The governor has been more disengaged than I have seen in the last couple of years,” she said, adding that he also is more inflexible.

“This governor is the permanent deficit governor,” she said.

If Pawlenty vetoes the new tax bill the speaker predicted deeper state program cuts. Kelliher would not say if the $1 billion tax proposal would be the limit.

But a leading Republican on taxes predicted it was not Democrats’ final tax offer. Rep. Morrie Lanning, R-Moorhead, said negotiations continue on the other tax-raising proposals.

“Nothing else is off the table,” Lanning said. “This is another idea that we have before us, but these other things may still come along.”

A key House tax leader said the tax proposal is a compromise. Rep. Paul Marquart, DFL-Dilworth, said the $1 billion in new taxes would replace a Pawlenty proposal to borrow that amount.

“We are coming down to his level,” said Marquart, chairman of the House property tax committee.

Marquart said that even if the bill is vetoed, legislators have “quite a bit of time” to work out a new deal.

Sertich said that Pawlenty will veto the bill, but lawmakers may see it again in the session’s final days. Democrats could attempt to override Pawlenty’s veto.

Rep. Rod Hamilton, R-Mountain Lake, said lawmakers were not provided information about how the tax bill would affect overall spending on education and health care.

“It’s extremely difficult here to vote on something that we don’t have all the details on,” Hamilton said.

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