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Senate plan would raise all income taxes

ST. PAUL - The Minnesota Senate will consider raising all state income taxes, with married couples earning more than $250,000 annually being taxed at a new, higher 9.25 percent rate.

Higher income taxes are the key to the Democratic-Farmer-Laborite controlled Senate plan that raises taxes $2 billion all told.

Today's announcement sets up a three-way tax battle with the House and Gov. Tim Pawlenty.

The DFL-controlled House on Monday begin looking at a plan that keeps all income taxes the same except for couples who earn more than $300,000. They would pay 9 percent of their income in taxes. The House bill also would raise tobacco and alcohol taxes.

"It's bad enough that Democrats propose giving Minnesota one of the highest income tax rates in the nation and raising taxes on someone having a beer or a glass of wine," Pawlenty spokesman Brian McClung said. "But they really go over the cliff when they propose to increase taxes for child care or for donating an organ."

Republican Pawlenty continues to say he will not accept a state tax increase. However, he does add revenue to his budget proposal by borrowing $1 billion.

The Senate plan raises the lowest income tax rate from 5.3 percent to 6 percent. Middle-income Minnesotans now pay 7.05 percent of their income in taxes, but under the Senate plan it would rise to 7.7 percent. The former upper bracket taxpayers' rates rise from 7.85 percent to 8.5 percent.

The Senate's proposed tax increases would run through 2013.

It also allows Cook County to use its existing local sales tax for more uses than one community center and allows the Seaway Port Authority of Duluth to levy a property tax up to 0.01813 percent. It also allows Cloquet and Perch Lake Township to levy a property tax up to 0.2835 percent of taxable market value.

Also, the bill eliminates truth in taxation hearings that local governments now are required to hold, giving the public a chance to comment on budget decisions.

Don Davis
Don Davis has been the Forum Communications Minnesota Capitol Bureau chief since 2001, covering state government and politics for two dozen newspapers in the state. Don also blogs at Capital Chatter on Areavoices.