Senate panel faces tough choice on taxes

04/29/2005

If hikes passed, Pawlenty likely to veto them

BY PATRICK SWEENEY
Pioneer Press

Sometime soon, probably Monday, members of the Minnesota’s Senate Tax Committee are going to have to swallow hard and vote on a package of tax increases totaling at least $1.3 billion, the committee’s chairman said Thursday.

“Yes, it will be a hard vote,” said Sen. Larry Pogemiller, DFL-Minneapolis. “I don’t know if the votes will be there.”

For the Democratic majority on the Tax Committee, though, the choice on taxes is likely to be a vote of approval. Democrats will be under strong pressure to accept a tax increase of that magnitude to pay for spending bills already passed by Senate finance committees.

“To meet the need of the bills that are passing the finance committees bipartisanly, it will take that kind of revenue,” Pogemiller said.

So far, the Senate Democratic-Farmer-Labor caucus has not voted on Pogemiller’s estimate of the total tax increase. Nor have the Democrats approved the individual taxes that would make up the total.

Instead, they have given considerable leeway to Pogemiller to come up with taxes to pay for the spending goals — primarily maintaining state-paid health care for low-income people and increasing funding for public schools — the DFL caucus announced last week.

But, given the opposition of Gov. Tim Pawlenty and his fellow Republicans, the chances of the tax increases becoming law are remote.

The small Republican majority in the House strongly opposes any major tax increase. And the Senate-proposed taxes would face a certain veto from Pawlenty if they were passed by both chambers.

Pawlenty signed a 2002 campaign promise to veto “any and all efforts to increase taxes.” In testimony Thursday before the Senate Tax Committee, four religious leaders called on lawmakers and the governor to accept an income tax increase as the fairest way for state government to serve Minnesota’s neediest residents.

“Our state’s budget is more than just a document,” said Archbishop Harry Flynn of the Archdiocese of St. Paul and Minneapolis.

“It is a moral statement … A just and equitable increase in income taxes, based upon each individual’s ability to pay, will provide additional revenues to our state to better meet the needs of our brothers and sisters who are facing serious economic hardships.”

Brian McClung, a spokesman for Pawlenty, said Pawlenty stands by his pledge to veto tax increases. In response to Flynn and the Lutheran, Muslim and Jewish clerics who testified in favor of an income tax increase, McClung said: “Endlessly looking to government expenditures to solve all of our ills is not necessarily wise.”

Pogemiller predicted his committee will consider an income or sales tax increase — probably an income tax increase — of $900 million to $1 billion, plus about $430 million in higher business taxes.

One of the business tax changes would close loopholes that allow a few companies to dramatically reduce their corporate income taxes by creating offshore subsidiaries. The other would restore a tax rate on business property to the level it was in 2002 before a law change led to its steady decline.