By Mark Fischenich
Free Press Staff Writer
March 17, 2007 06:19 am
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Minnesotans with taxable incomes of more than $226,000 and couples earning more than $400,000 a year would pay more in income taxes while property owners would see their property taxes drop under a plan put forth by state House Democrats.
“Every dollar raised there goes toward property tax relief,” said Rep. Terry Morrow, DFL-St. Peter, who supports the plan to create a higher tax rate for the wealthiest Minnesotans.
Rep. Kathy Brynaert of Mankato supported the budget outline released by House DFLers Friday when it came before the Ways and Means Committee later in the day.
“It’s not about spending, spending, spending. It’s about tax fairness,” said Brynaert, DFL-Mankato. “... It fits within a vision of a fair, more equitable form of taxation. And really we’re trading one form of tax for another.”
If the proposal passes the DFL-dominated House and survives in negotiations with the DFL-controlled Senate, it would be almost certain to be vetoed by Republican Gov. Tim Pawlenty, who opposes statewide income tax increases.
Rep. Bob Gunther said there won’t be enough support in the House to override a veto, which requires a two-thirds vote. That will happen only if fewer than 45 House Republicans stick with their governor.
“There would be more than 45 to uphold the governor’s veto,” said Gunther, R-Fairmont, whose district includes Watonwan County and part of Faribault County.
Gunther said income tax hikes are unnecessary because of the state’s $2 billion surplus. About $1 billion of that is one-time money that’s not expected to reoccur as added state revenue in the future, and that money could be dedicated to a one-time property tax break for all homeowners, farmers and other real estate owners.
“I think it’s a good start,” he said of the one-year property tax relief.
The DFL plan generates more than $215 million a year in additional income tax revenue that would be dedicated toward on-going property tax relief. In addition, DFLers intend to boost tax compliance and close certain techniques used by some companies with overseas operations to avoid paying state taxes.
By boosting revenue to provide property tax relief, Brynaert and Morrow said the plan preserves the surplus money to boost spending on education and provide health care coverage for the estimated 70,000 uninsured children in the state.
“We can do some pretty substantial property tax relief and still fund some really key initiatives in education and health care,” Brynaert said. “And that’s what we committed to (in last fall’s campaign).”
Gunther said he’s not opposed to many of the programs that Democrats want to spend more money on.
“Some of their proposals are fine,” the retired grocer said. “I don’t intend to throw a cloak of gloom over the whole thing.”
But Gunther said he thinks there would be negative consequences to boosting the tax rate — from 7.85 percent to 9 percent — on high earners.
“Do you know anybody making minimum wage who’s ever started a factory or hired someone?” he asked, saying high taxes can drive job-creators to other states. “I think they’re going to choose to go someplace else.”
Morrow counters that the Republican alternative the past four years was to force $2 billion in property tax increases on all Minnesotans regardless of their income. Couples with incomes of over $400,000 a year — after deductions — are more able to withstand a tax increase than retired people, farmers and other lower income homeowners, according to Morrow.
“This brings tax fairness and proper investment in Minnesota’s future,” he said, referring to budget increases for schools and health care coverage for kids. “... We’re investing in Minnesota’s future with this package.”
Details of the budget will be worked out in coming weeks. A final negotiated budget that Pawlenty is willing to sign must be completed by May 21 if lawmakers and the governor are going to finish the session by the constitutional deadline.
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