With budget out, Dayton and GOP can start dealing

Gov. Dayton's budget plan focuses on what he promised during the campaign for governor -- taxes on Minnesota's top earners.

He's proposing a fourth income tax rate of 10.95 percent, up from the current top rate of 7.85 percent. The new higher tax would kick in on single filers with taxable income of $85,000 or more and on couples with taxable incomes of $150,000 or more a year.

Dayton also wants people earning more than $500,000 a year to pay a 3 percent surtax on top of that.

The governor says his plan is fair because it would require the state's top earners to pay the same percentage of their income in taxes as everyone else.

"Only 5 percent of the wealthiest Minnesotans will see a tax increase under my proposal. Ninety-five percent of Minnesotans will receive no tax increase in state income or state-imposed local government proposed increase," he said. "This tax proposal, especially with a $6.2 billion deficit, remarkably protects Minnesota taxpayers."

As expected, Dayton's plan was immediately panned by Republicans legislative leaders. Sen. Geoff Michel, R-Edina, called the tax plan a job killer and criticized Dayton for wanting to make Minnesota's income tax rate the highest in the nation.

"I don't want to say it's dead on arrival but it doesn't have much of a heartbeat," he said.

Republicans have insisted that they can balance the budget by cutting spending. The disagreement with the governor sets the stage for a session in which one side will have to give in order to finish by the constitutional deadline of May 23.

Dayton says that's what he wants, and that there's no reason the two sides should reach an impasse that would result in a government shutdown.

Despite their criticism of his plan some Republican leaders are also suggesting that there is plenty of room to negotiate a budget solution, but they say that solution has to come on the spending side.

Rep. Greg Davids, R-Preston, who chairs the House tax committee, suggested before Dayton's budget announcement that the governor will take the blame if they can't reach an agreement.

"At the end of the day, we'll be presenting the governor with a budget that has about a 5 or 6 percent increase," Davids said. "If that doesn't work and the governor vetoes those bills and we get to July 1st and we have a shutdown, it's on the governor."

The prospect of a gridlocked legislative session isn't worrying lawmakers yet. Rep. Ann Lenczewski, DFL-Bloomington, said lawmakers have to consider two things as they head into budget negotiations.

First, when do they need to make a deal, and second, what issues won't they touch. She said the freshman Republicans in both the House and Senate have a considerable amount of clout since there are so many of them -- 33 new members in the House and 21 new members in the Senate.

"The freshman majorities have huge power here to define the solution. I don't know if they're aware of that yet," she said. "I think they're all very different people and I think because there are 33 freshman of 72 in one body, and more freshman than returning members in the Senate, they can absolutely hold the key to this whole thing if they want to."

Lenczewski says the hard part for Republicans will be when they realize Dayton won't support their plan to erase the deficit with spending cuts alone.

At that point, she says the real negotiating will begin and the potential for other sources of revenue, like fee hikes or gambling could become a factor.

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