Senate DFL tax hike: $991 million

ST. PAUL Minnesota Senate Democrats are making a $991 million point.

That is how much they propose raising from the state's richest taxpayers, who would have to pay the country's highest tax rate.

"It points out where the real problem is," Sen. Keith Langseth, DFL-Glyndon, said about the need for money to fund education and property tax relief.

When they are candid, some Democratic-Farmer-Laborites admit their proposal and a smaller House DFL income tax hike have little chance of getting past Gov. Tim Pawlenty's veto pen.

"Then we are going to have to get to reality," Langseth said. "We know we are going to move."

Senate vote today

The Senate Taxes Committee passed the quickly crafted measure Friday, and the full Democrat-controlled Senate is to vote on it today in what some predict will be a marathon session.

If the Senate passes the tax increase today, as expected, it sets up two battles. First, senators would have to work with House leaders, who want to raise income taxes $433 million to fund property tax relief.

If the House and Senate agree on raising income taxes in any amount, they face a promised veto from Pawlenty, who appears to have sufficient support from legislative Republicans to sustain the veto.

Sen. Julianne Ortman, R-Chanhassen, delivered a message to Pawlenty: "You are the only one who stands between $4.6 billion in new spending and protecting our economy."

Details of DFL planUnder the Senate DFL plan, a new top income tax tier would require Minnesota couples making more than $250,000 annually to pay 9.7 percent of their income to the state. They now pay 7.85 percent.

The new tier would affect about 60,000 returns, said Tax Chairman Tom Bakk, DFL-Cook.

Langseth; Sen. Rod Skoe, DFL-Clearbrook; and Bakk were among senators who wanted to spread tax increases out over most taxpayers.

"I didn't prevail, but I'm OK with this," Skoe said.

Governor bending?Bakk and Senate Majority Leader Larry Pogemiller, DFL-Minneapolis, said they think that because Pawlenty refused to sign a pledge to not increase taxes as he has done in the past he could go along with some form of income tax increase. But Friday, Pawlenty continued to say he would not think of doing do.

"We didn't raise taxes when we had a huge deficit; why would be want to now?" the Republican governor asked on his weekly radio show.

Pogemiller said the tax increase, to fund $444 million in education funding increases and $547 million in property tax relief, is what Minnesota needs.

"This is not a political game," Pogemiller said.

But most lawmakers say the income tax increase will not survive as is.

"We will compromise," Skoe said.

House Speaker Margaret Anderson Kelliher, DFL-Minneapolis, said the House doesn't agree with the Senate approach.

"I hope that they will consider our plan strongly," Kelliher said.

The Senate passed an unrelated tax bill Friday that would give several kinds of tax relief, mostly in property taxes.

The measure also would end the Job Opportunity Building Zone program, Pawlenty's top rural economic development initiative. But businesses now in JOBZ tax-free zones would be allowed to continue to receive the tax breaks.

Bakk helped get JOBZ passed in 2003, but said: "It's not doing what I had hoped it would do. Tax preferences on their own just are not enough to get economic expansion in rural areas of the state," he said.

Also in the bill-- $150 million to increase Local Government Aid to cities.

-- $60 million more aid to counties.

-- Allowing local sales taxes in Duluth, Cook County, Proctor, Thief River Falls, Bemidji, Clearwater, Cloquet, Crookston, Ely, Minnetonka, North Mankato and Winona.

-- $1.5 million to Moorhead, East Grand Forks, Dilworth, Ortonville and Breckenridge to better compete with North Dakota and South Dakota.

Most Democrats supported the tax bill, and all Republicans opposed it. The only Democrats to oppose the bill were Sens. Ann Rest of New Hope, Kathy Saltzman of Woodbury, Linda Scheid of Brooklyn Park and Kathy Sheran of Mankato.

The Senate also approved a bill calling on the state's utility companies to bolster their energy conservation efforts. It orders the state Commerce Department to offer nearly $10 million in grants for energy conservation research.

Senators passed the bill 64-1. A companion bill is moving through the House.

State Capitol Bureau reporters Scott Wente and Mike Longaecker contributed to this story. They and Davis work for Forum Communications Co., which owns the Herald.