On tax policy, gov candidates find little common ground

Typically candidates for statewide political office are reluctant to talk about taxes. The general thinking is that it's an election year liability, because no one likes to pay them.

But a nearly $6 billion projected budget deficit and years of belt tightening by Republican Gov. Tim Pawlenty have prompted two of the candidates to talk candidly about the need for more revenue.

MARK DAYTON

"You can read my lips. Tax the rich," is Democrat Mark Dayton's go-to line when it comes to his proposed tax policy. He has made taxing Minnesota's top earners the centerpiece of his campaign.

For months, Dayton has argued the wealthiest Minnesotans pay a smaller percentage of their income in taxes than low and middle income Minnesotans. Dayton wants to increase the tax rate for single filers with taxable annual incomes of $130,000 and higher. Couples would pay that higher rate if their income after deductions is above $150,000 a year.

"What's at stake in this election is nothing less than the future of Minnesota," Dayton said. "The evidence shows that we have been most successful when, as Paul Wellstone said 'We all do better when we all do better.' And I believe there are some who can contribute more so we can all do better."

Dayton's two opponents, Republican Tom Emmer and the Independence Party's Tom Horner, both say Dayton's tax plan will hurt small business owners.

TOM HORNER

Horner is also pushing a budget plan that increases taxes, but it's based more on consumption. Horner wants to expand the sales tax to clothing and unspecified services. At the same time he would lower the tax rate by one percentage point.

"We want a tax system that reflects the economy, that's going to stabilize Minnesota's revenue so we have some predictability," Horner said.

Horner said that predictability will come when the state becomes less reliant on the income tax and more dependent on the sales tax. Horner has been vague about which services would be taxed under his sales tax expansion. The range of options include everything from baby products to hair cuts to auto repair. Horner said he won't expand the sales tax to food, medical services or business to business services. But he said individuals who hire a lawyer or an accountant may be taxed.

"Minnesota has a tax system largely created in the 60s and 70s for an economy based at that time in manufacturing and natural resources and for a population largely of young families coming into their high spending, high earning years," Horner said. "That's neither the economy nor is it the population we have anymore."

Horner said he'd also create some sort of tax credit so low income Minnesotans aren't hit too hard by his plan.

TOM EMMER

While Dayton and Horner are outlining their tax plans, Republican Tom Emmer said raising taxes in an economic downturn is a big mistake.

"On the one side, you have two people that want to raise billions of dollars in new taxes and grow government further," Emmer said. "I believe you have to reduce the size of government."

But Emmer's plan to erase a projected budget deficit means some real cuts to government agencies, higher education and aid to cities. He also proposes to scale back the rate of spending growth for K-12 schools and health and human services. But Emmer said his budget plan forces the state to "live within its means."

"The only way we have a deficit is if we are committed to spending more than we have," Emmer said. "That's the whole point. We're talking about government shouldn't be growing at a pace of 20 percent over the next two years."

But Emmer's opponents argue that his budget will mean cutbacks in school funding, fewer people on subsidized health insurance and higher property taxes - taxes they say will hurt Minnesotans more than the ones they're proposing to raise.