GOP Sen: Senate DFL’s tax plan ‘a mistake’

MARSHALL – A month after Gov. Mark Dayton put the clamps on his ambitious and controversial tax plan, Democrats in the Minnesota Senate appear to be trying to take those clamps off, at least to some extent.

The Senate on Thursday released its budget plan that would lower the state sales tax from 6.875 percent to 6 percent. It would also extend a tax on clothing, online purchases and a number of personal services and give low-income Minnesotans a tax credit. Corporate income taxes would also be trimmed. Overall, the plan would broaden the sales tax but lower the rate to its lowest level in years.

“I knew some of the leadership on the Senate side didn’t want to give in as early on the sales tax hike the way Dayton did,” said District 16 Sen. Gary Dahms, R-Redwood Falls. “I don’t know how serious they are. We’ll just have to see how it plays out. I don’t know if this is a negotiating issue of they truly believe they need to do this. It’s like throwing a lot of new taxes against the wall and seeing what sticks.”

District 17 DFL Sen. Lyle Koenen of Clara City said the Senate’s version, although it reintroduces some of Dayton’s ideas, isn’t that comparable.

“We really toned it down compared to what Gov. Dayton had first proposed,” Koenen said. “We took out some of the operating stuff, the foreign royalties; it’s not as aggressive as Governor Dayton’s, and the business-to-business, we didn’t go into all of that, we didn’t touch it.”

Dayton’s original budget plan drew harsh criticism from business owners, and even some Democrats in St. Paul hesitated to throw their full support behind it because of the business-to-business piece and business service tax. Dayton is sticking with his plan to raise income taxes on the wealthiest income-earners.

But Republicans like Dahms say all these new taxes are not needed.

“I personally think it’s a mistake,” Dahms said. “If you take a look at February and March, we have another $145 million surplus over the forecast; at this point, there is no reason we need to raise taxes. We can do a biennium without raising taxes.”

Dayton’s tax plan also included a proposal to raise the cigarette tax by 94 cents, and the Senate appears to be following his lead on that – it’s looking at bringing in more than $735 million on this tax during the next biennium.

The Senate heard testimony on Friday concerning another “sin-tax” – the alcohol tax, which, like the cigarette tax, is regressive in nature.

“I don’t know if it will get into the final bill or not,” Koenen said. “There was quite a bit of discussion about it, a lot of testifiers. In general, it would amount to about five cents a drink. It isn’t nearly as big a jump as the cigarette tax.”

“My assumption is they’re having trouble agreeing on which taxes they want to raise,” Dahms said. “It seems like new taxes always seem to pop up. But when Dayton went around the state and talked to people and businesses he found out that the sales tax was a real crippler. I think the Senate will find out the same thing.”