Senate DFLers shift strategy in budget debate

Senate DFLers say they are going to put forward two tax bills. The first would increase the statewide business property tax and closes a tax loophole on businesses that operate overseas.

Senate Taxes Committee Chair Tom Bakk, a DFLer from Cook, says that money will provide $376 million in property tax relief for homeowners. He says the plan is fair because business property taxes haven't increased as fast as other property taxes.

"The business community is going to say, 'Oh my gosh, the sky is falling,' but most homeowners would have been happy if they were held to a 3 or 4-percent increase," he said.

Bakk says the second tax bill will be released on Friday and will increase income taxes. He says he's still working on the details, but is considering two options. The first would roll back the 2001 income tax cuts for all Minnesotans and also raise income taxes on wealthier Minnesotans. The second option would create a new income tax bracket for wealthier Minnesotans.

Bakk says money from the increase would pay for new programs for schools, early childhood education and college tuition.

"The truth is those things have to be paid for," he said. "And we're suggesting that the best way to pay for those things is through the progressive tax that we have here in the state through the income tax."

The Senate has spent the past two weeks passing spending bills that don't spend much more than Gov. Pawlenty's budget proposal. Over the past month, Senate Majority Leader Larry Pogemiller has been arguing that Gov. Pawlenty's budget proposal was based on false numbers. They complained that Pawlenty was using money the state can't count on past this fiscal year to pay for ongoing programs. They also said inflation erased half of the $2 billion projected surplus.

"I think members need to be straightforward," Pogemiller said. "If they want to spend the money, they need to be willing to come up with the revenue to pay for it. We've had overwhelming votes for all of the spending bills. Senator Bakk's tax bill needs to pay for it."

Senate Republicans and Gov. Pawlenty aren't surprised by the move since Senate Democrats have proposed tax increases over the last few years.

Sen. Julianne Ortman, R-Chanhassen, says the public can't afford all of the tax increases being proposed. She notes the proposals for higher property and income taxes comes just days after passing a transportation bill that increases the gas tax and license tab fees.

"Evaluate the whole picture, because it looks like maybe a little bit more in taxes here and there," she said. "But when you add it all up, it's a great big bill being delivered to the taxpayers to the state of Minnesota."

The Senate proposal comes nearly two weeks after House Democrats said they wanted to increase income taxes on upper income Minnesotans to pay for property tax relief.

Gov. Pawlenty says he'll veto the bills. In private meetings on Tuesday, Pawlenty urged Republicans in both the House and Senate to hold the line on spending. He says his two-year budget, which increases spending 9 percent, is high enough. He says budget negotiations could grow difficult over the next two months.

"They're raising a bucketload of taxes and that isn't the kind of approach that is going to yield a constructive and smooth end to the session," Pawlenty said.

Pawlenty may not be happy with other provisions in the Senate tax bill. Sen. Bakk says he intends to eliminate Pawlenty's JOBZ program, which gives tax breaks to businesses that move to economically depressed areas in Minnesota. Bakk, who authored the JOBZ bill, doesn't think it's working. Bakk says the bill would also allow the city of Bloomington to increase a variety of sales taxes at the Mall of America to pay for the mall's expansion. Bakk says he intends to have both bills voted out of his committee by Friday.

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