Dayton pushes taxes to skeptical business leaders

Gov. Mark Dayton laid it on the line to state business leaders Thursday night when he told the Minnesota Chamber of Commerce that Minnesota is under taxed.

Dayton challenged the business community to help him come up with solutions to erase the state's budget deficit. His stance puts him at odds with the business community and the Republicans who control of the Legislature.

During former Gov. Tim Pawlenty's eight years in office, the annual Minnesota Chamber of Commerce dinner was a home game for him. The chamber supported both of his campaigns and enthusiastically backed his "no new taxes pledge."

Mark Dayton's speech was a dramatic reminder that there's a new governor in power that the business community campaigned against. Dayton joked about those efforts at the start of his speech.

"I'm very delighted to be with you here tonight, and I mean it both facetiously and somewhat seriously when I say that one of the great features of our democracy is when you and some of your friends and allies could spend $3.5 million to defeat me in an election and then after it's over, invite me to dinner," Dayton said.

Dayton's speech turned serious as he discussed the magnitude of the state's fiscal situation. He laid out a litany of facts to show state taxes are lower today than they were 10 and 20 years ago. But he said property taxes have gone up -- which he says is unfair to poor and middle income Minnesotans. Dayton campaigned on a plan to raise income taxes on Minnesota's top earners.

Dayton said Gov. Pawlenty ordered every state agency to submit 15 percent across the board budget cuts. He said those cuts would save $525 million over the next two years -- a small fraction of the state's projected budget deficit.

"That is why I say, respectfully, to anyone who thinks this session is going to be easy and painless, please share your magic potion with the rest of us," Dayton said. "Or else get to work reading and understanding the state budget as I have."

Dayton has been working to link the need for more revenue to improving the state's school system. He argues Minnesota's workforce is productive because previous generations invested heavily in education.

"Minnesota's businesses do better when their customers -- the people of Minnesota -- do better," he said. "And to close the circle, our people have done better because our schools, colleges and universities have historically provided them with superior educations."

The room was stone silent during Dayton's speech and he received tepid applause and a slow to rise standing ovation when he finished.

Minnesota Chamber of Commerce president David Olson said his organization aims to work with Dayton on three key areas: education, streamlining state regulations and job creation. But Olson argues Dayton can't put an emphasis on jobs and continue his push to raise taxes.

"It's not a message that other states are doing around the country," Olson said. "My biggest fear is that I have members of ours who are being contacted everyday by other states that say 'Come to our state, we'll build your plant for you. We'll train your people.' The best thing we can do here is say we like our businesses. We want to do what we can to keep them here and expand here."

Olson said he would prefer to see Dayton and the Legislature build a new budget based on the amount of money the state is expected to receive over the next two years, instead of the money the state is projected to spend. He said that so-called zero-based budgeting concept will force policy makers to set priorities. Republican Senate Majority Leader Amy Koch said her caucus will introduce a plan like that next week.

"We take the governor's challenge to live within that budget, to balance the budget without raising taxes and we will move that move forward," Koch said. "We will do that by prioritizing, by restructuring because what we're doing currently is not sustainable."

Dayton and other Democrats say Republicans can't balance the budget with spending cuts alone without impacting schools, nursing homes and other key programs.

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