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South Washington County lawmakers have some support, plenty of questions for Dayton budget plan

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government Cottage Grove, 55016
Cottage Grove Minnesota 7584 80th Street South 55016

South Washington County lawmakers offered tepid support for key parts of Gov. Mark Dayton's state budget plan, questioned others and said they need to know more about how it would affect local residents.

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Sen. Katie Sieben and Rep. Dan Schoen, both Democrats, said the proposal is honest in how it would balance the state budget by raising taxes and cutting spending rather than relying on funding shifts and other gimmicks that have been used in the past.

"Some people are scared about certain provisions," said Schoen, "but the whole point is it's big change and he said he was going to do that."

Some taxes may end up being raised to help balance the budget, but Dayton's plan heavily favored tax hikes over spending cuts, countered Republican Rep. Denny McNamara.

"That's putting 15 kids on one side of a teeter-totter and one on the other," McNamara said of $3.5 billion in total tax increases and $225 million in spending cuts. "That's not really balanced."

Facing a state budget deficit estimated at $1 billion, Dayton last week proposed raising income taxes on Minnesota's top earners, expanding the sales tax to include more items and services while at the same time lowering the sales tax rate. He would also lower the corporate income tax rate, freeze business property taxes and provide a property tax rebate to homeowners.

Cities and counties would see increased state aid, and schools and colleges also would see more state funding if the DFL-controlled Legislature approved Dayton's plan.

Overall, Dayton proposes $3.5 billion in new tax revenue and spending cuts totaling $225 million. There also would be $1.5 billion in property tax refunds.

Lukewarm to sales tax changes

The sales tax proposal may be a tough sell. The plan broadens the tax to include clothing items over $100 and for the first time would tax many services purchased by consumers and businesses. At the same time, the budget plan lowers the state sales tax rate from 6.875 percent to 5.5 percent. Dayton said that means most families would not pay more sales tax overall.

"I think that would be a more difficult sell for some legislators," Sieben said of the sales tax changes, acknowledging that "it will hit businesses."

Sieben said she doesn't know whether she will support a tax on clothing items of $100 or more.

"Obviously I'd prefer it to be at $200," she said, referring to a different DFL clothing tax proposal. "That's part of the overall budget discussion to have. We'd prefer not to do any of this but the reality is we have to stabilize the state budget."

Proponents argue a broader sales tax would help reduce steep fluctuations in state tax collections.

McNamara said broadening the sales tax would have a lot of support if it was pared with a rate lower than Dayton has proposed.

Schoen wasn't ready to fully embrace the sales tax plan.

"The things that I want to see and have a better understanding of it broadening that sales tax (and) lowering the base," he said. "How does that affect our neighbors?"

Schoen said he wanted to study Dayton's overall plan, but did say he was excited to see increased education funding, including for all-day kindergarten.

Dayton also proposed a fourth-tier income tax rate of 9.85 percent for couples earning more than $250,000 in taxable income. Sieben and Schoen have said they support an income tax increase on the wealthiest Minnesotans.

McNamara said it's already clear that would have a negative impact and send Minnesotans to other, lower-taxed states.

"It does have an economic impact," he said. "We have people that have left our community and have gone to Florida."

McNamara also questioned Dayton's $500-per-homeowner property tax rebate. He said more reform is needed in the state's property tax system, not just a rebate.

"It's awfully enticing to tell somebody you're going to get the first $500 of your bill," McNamara said. "The reality is, is that the best way to give back to taxpayers?"

Cigarette tax splits

Dayton's plan to raise the state cigarette tax by 94 cents a pack also drew mixed reactions.

"It's a concern," Sieben said, but she said if the plan was approved Minnesota's tax would be in line with Wisconsin's.

"I don't know that we need to add a buck to it," McNamara said of the cigarette tax.

McNamara said raising the cigarette tax "in itself doesn't throw up a huge red flag to me," but he opposed to the level of Dayton's increase. He said he'll ask constituents about the issue in a survey.

The cigarette tax is a regressive tax, hitting low-income Minnesotans harder, Schoen said. However, the tax increase is aimed at getting more people to quit smoking, he said.

"I'm supportive of the cigarette tax," he said.

Lawmakers have made tough spending cuts in recent years, so it may be harder to find easy areas to trim funding, McNamara said. However, he added, more probably could be cut from health and human services programs. He did not mention specific programs, but said Republicans will have their own ideas on how to balance the budget.

Schoen, of St. Paul Park, said critics of Dayton's plan need to provide a detailed alternative.

"The bottom line is they've been cutting the budget for years," he said. "I'm all for finding ways to save money, but when I hear Republicans say we absolutely have to cut and that's the only way we can do it - tell me where, show me how we can do it," he said.

Sieben said Minnesotans should like Dayton's approach, if not all parts of the plan.

"I think that people have said they want an honest budget that includes cuts and new revenue to make new investments in education and property tax relief, and I applaud the governor for starting that discussion."

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