Dayton will propose tax increase as part of budget solution

Gov. Mark Dayton will propose a tax increase for wealthy Minnesotans as part of his solution to the state's $6.2 billion deficit.

Dayton announced his intentions Wednesday during his first State of the State before the state Legislature.

Dayton, a Democrat, didn't release details about his budget proposal, which will come on Tuesday. But he said he anticipates criticism.

"Some will criticize me for proposing next week to ask those successful businessmen and women and other wealthy Minnesotans to pay higher taxes," Dayton said. "I ask them for their forbearance during this fiscal crisis, which I did not create, but inherited, and now, with you in the Legislature, must solve."

The Republican-controlled Legislature likely won't embrace Dayton's tax hike proposal, which means the two sides will have to negotiate a deal before the next fiscal year starts in July.

If no agreement is reached, state government could be shut down -- a prospect Dayton implored legislators to avoid.

"It is absolutely unthinkable that we would contemplate doing so," Dayton said, referring to a hearing held at the Capitol about the effects of a potential state government shutdown.

Dayton asked lawmakers to take up the challenge of solving the state's fiscal crisis, using the example of the actions the U.S. government took following the Sept. 11 terrorist attacks.

"On the night of 9/11, I stood with my fellow United States senators and representatives on the steps of our Capitol to assure our fellow citizens that our government had not shut down, would not shut down, could not be shut down," Dayton said. "I implore you to join with me now ... and pledge to the people of Minnesota that we will not shut down their government, our government -- not next July 1st, not any July 1st, not any day ever."

Dayton outlined several areas in which he wants to see the state invest, starting with job creation. He also said the state should invest in better education and improved transportation.

Dayton also proposed a group that would work to transform how government services are delivered and look for cost savings. The group would be made up of administration officials, state government employees and business leaders.

Without giving specifics on the tax increase, Dayton suggested it might be temporary.

"I ask Minnesota's business leaders and other most successful citizens to give us two years to turn this 'Ship of State' around," he said. "Not by savaging essential public services, upon which you and your employees also depend, but rather by transforming the ways in which government operates here in Minnesota."

Senate Majority Leader Amy Koch, R-Buffalo, said she was disappointed to hear a tax increase would be part of his budget proposal and said the response in the House chamber during the speech was "tepid," even from Democrats.

"I would wonder about the support the governor's got even in his own party on the tax proposals," Koch said.

Dayton proposed several increases in funding, including for expanding all-day kindergarten and improving transportation infrastructure. He said current investments in transportation are inadequate to maintain or expand them.

Koch said Dayton's investment proposals were "shy on details."

"He is making promises that he doesn't have the dollars to support," she said.

House Majority Leader Kurt Zellers, R-Maple Grove, said government must make sacrifices to make it through the crisis.

"Raising taxes during tough times will devastate your state's economy," he said.

Zellers said Dayton's speech was looking "backwards in time for solutions."

But DFL legislators, including Rep. Paul Thissen of Minneapolis, said the governor was being realistic.

"He really believes that we need to do a much better job of making sure that all Minnesota citizens are doing well. And the budget he has to put forward because of the challenges we're facing is not going to allow him to do that in the way he wants," Thissen said.

(MPR reporters Tom Scheck and Tim Nelson contributed to this report.)

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