Tax-for-tax bill headed for veto

A DFL measure to tax the wealthiest residents to finance property tax cuts for most Minnesotans was sent to GOP Gov. Pawlenty, who vows to reject it.

By Conrad Defiebre, Star Tribune

Last update: May 11, 2007 - 10:47 PM

An income tax increase on the wealthiest Minnesotans that is linked with property tax relief for most homeowners, renters and businesses was sent to Gov. Tim Pawlenty on Friday.

But the margin in the Legislature was far short of the two-thirds majority required to override his promised veto.

Eleven outstate and suburban DFLers in the state House joined all Republicans present in opposing the first tax measure to hit the governor's desk this year. The vote was 73-58.

"The DFL plan is a shell game," Pawlenty spokesman Brian McClung said. "They offer some property tax relief but are raising a bunch of other taxes -- on income, on gas, on license tabs, on businesses. The governor's budget has property tax relief without raising any other taxes."

DFL proponents described the bill, House File 2294, as a revenue-neutral shift of $452 million over two years from property taxes to a new 9 percent income-tax tier.

It would affect an estimated 20,700 Minnesotans with taxable annual incomes of more than $226,000 for singles or $400,000 for married couples, with the biggest bites from those making more than $1 million.

Part of the money would go to direct refunds for homeowners and renters, and the rest to buying down school district levies, which House Taxes Chairwoman Ann Lenczewski said would benefit businesses as well.

"This is permanent property tax relief based on the ability to pay," said Lenczewski, DFL-Bloomington. She said the measure would reverse a Minnesota trend of the rich paying smaller percentages of their income in state and local taxes than do those of lesser means.

"It's about tax fairness," said Rep. Carlos Mariani, DFL-St. Paul.

Republicans, however, denounced the measure as income redistribution that would drive more wealthy Minnesotans to lower-tax states.

"It's forced confiscation," said Rep. Steve Sviggum, R-Kenyon.

"It's a bad bill for jobs and growth. The governor will veto it on Monday."

Other GOP legislators said property tax relief wouldn't last because the bill does nothing to prevent local governments from raising their levies in the future.

And Rep. Erik Paulsen, R-Eden Prairie, said the plan would not be sustainable because fiscal projections show it running a deficit in the next decade.

Given the governor's stance and DFL defections, he added, "This is more theater today than anything else."

Conrad deFiebre • 651-222-1673 • cdefiebre@startribune.com

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