House Democrats propose new top tier on income taxes

House DFL leaders are targeting more than $500 million in their new budget plan for property tax relief. They want to ease the burden on property owners by increasing state aid to cities, reducing school district levies and boosting the tax credits and refunds available to property owners now.

Speaker of the House Margaret Anderson Kelliher says most of the revenue for property tax relief would come from a new income tax bracket.

"Every single penny of that fourth tier of income tax pays for permanent and significant property tax relief spread fairly through the state," she said.

Married couples filing jointly would be subject to the higher tax rate if their income after deductions is $400,000 or more -- $226,000 for single filers. The new tax rate would be 9 percent, up from the current top tax rate of 7.85 percent

Kelliher says the new tax bracket would generate $433 million from an estimated 28,000 Minnesotans. She says additional revenue would come through increased tax enforcement efforts and increasing the taxes paid by companies with operations in foreign countries.

"It looks like a legislative Taxapalooza."

The DFL budget proposal also boosts education spending by $919 million, which includes funding for all-day kindergarten. There's also money to provide 70,000 children with health insurance.

DFL Majority Leader Tony Sertich says the budget plan should be viewed as much more than an income tax increase.

"We're providing for better schools, more investment in our schools, which means more investment in our children, which means a better economy in Minnesota," Sertich said. "We're providing for more health care, comprehensive health care starting with our kids. These are the issues we heard about from Minnesotans. This is how we got to this number today."

DFL leaders say they want to work closely with Gov. Pawlenty on the budget. But the income tax increase will likely face a veto. Even before he saw the proposal, the Republican governor was criticizing the direction Democrats have been heading this session during his weekly radio show.

"If you look at the bills being introduced again by my friends on the other side of the aisle, it looks like a legislative 'taxapalooza.' I mean they've got income tax increases, sales tax increase, tax increases everyday there's a new bill introduced for tax increases," Pawlenty said.

The latest DFL plan brought even harsher assessments from Republican legislators.

"This is March madness, folks. This is craziness. It's absolute craziness," Rep. Steve Sviggum, R-Kenyon, told reporters. Sviggum says Minnesotans should be thankful that Gov. Pawlenty is in a position to veto the DFL plan. He accused Democrats of trying to tax everything that moves. Sviggum says a new income tax bracket would cause an exodus of prosperous Minnesotans.

"We do have many former Minnesotans who now call Texas, Arizona, Florida home. And it's not just because of a better climate. They call Florida home because of tax burdens. And if you significantly increase those tax burdens, more Minnesotans are going be driven out of the state for that purpose," he said. Sviggum and other House Republicans are also trying to slow down property taxes. They've proposed using about $1 billion from the projected budget surplus for a one-time, across-the-board-reduction of 15 percent. Gov. Pawlenty is proposing a cap on property taxes in cities that rely heavily on state aid. On his radio show, Pawlenty said he was disappointed the plan wasn't getting much consideration by the Legislature.

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