DFLers stray from party to defeat tax bill

04/20/2006

Businesses would have paid more

BY PATRICK SWEENEY
Pioneer Press

Six Democratic-Farmer-Labor members of the Minnesota Senate joined 29 Republicans Wednesday to defeat a bill that would have raised two business taxes to provide property tax relief for homeowners.

The action by the “gang of six,” as one of the defecting Democrats labeled the group, was a defeat for Senate Taxes Committee Chairman Larry Pogemiller, who insisted on pushing the bill to a vote even though he knew some members of his own party opposed it.

The crossover votes by the Democrats also were a departure from the caucus cohesion that has allowed the DFL majority to retain tight control over the Senate for three decades.

“I have voted for every tax bill in 30 years — except this one,” said Sen. Keith Langseth, a dairy farmer from Glyndon who was elected to the House of Representatives in 1974 and has served in the Senate since 1981.

The two business tax changes, a repeal of tax breaks for companies that have foreign operations and an increase in a statewide property tax levied against business, probably never would have become law, regardless of how the Senate voted.

That’s because the Republican House majority opposed them, and because Gov. Tim Pawlenty signed a 2002 campaign promise to veto any tax increase.

But the surprising defeat of the tax bill is likely to change the political dynamics of the final four-and-a-half weeks of the legislative session and influence Senate Democrats to bring their tax and spending priorities more into line with the House and Pawlenty.

“It has to be modified,” Langseth said of the defeated tax bill. “I think the gang of six now should sit down with the majority leader and the tax chairman and say what we’ll accept.”

In addition to Langseth, the Democrats who voted with the Republicans were: Terri Bonoff of Minnetonka, Tarryl Clark of St. Cloud, Ann Rest of New Hope, Dallas Sams of Staples and Dan Sparks of Austin. Rest is the assistant majority leader of the Senate Democrats.

The defeat Wednesday may mean that a second $197 million tax bill — a proposal to raise the top personal income tax rate paid by high-income Minnesotans and use the new revenue to give married people a tax break and provide relief for thousands of people who have to pay the so-called “alternative minimum tax” — will be modified or dropped from consideration.

“It is parked in the Senate for now,” Senate Majority Leader Dean Johnson, DFL-Willmar, said of the second tax bill. “I think the key word there is parked.”

Johnson said he was inclined to significantly scale back the tax relief that Senate Democrats will try to enact this year.

The defeat also could affect spending increases that Democratic committee chairs are seeking for early childhood education, higher education and state-subsidized health care. The Senate had been scheduled to vote on a spending bill today; the vote was postponed after the defeat of the tax bill.

Many of Pogemiller’s fellow Democrats thought that proposal went too far for a nonbudget year.

Langseth, Rest and Sams said they could have voted to eliminate the tax break for foreign operating corporations, but objected to raising the statewide property tax for businesses by $140 million.

“It was too rich,” Sams said of the package of tax increases.

Pogemiller said after the vote that he knew he did not have enough Democratic votes to pass the bill, but he hoped some Republicans would support it as good policy. He said commercial-industrial property taxes have increased less than 6 percent since 2001, while homeowners’ taxes have increased nearly 40 percent.

“This is simply a matter of making those pay who were supposed to pay,” Pogemiller said of revoking the tax breaks for domestic income passed through companies’ foreign operations.