Gov. Mark Dayton wasted no time on pleasantries as he addressed several hundred Minnesota Chamber of Commerce members Wednesday, the day before his expected release of a revised state budget plan.
The DFL governor's business critics won Round One of this year's Great State Tax Debate last week, when they got him to concede defeat on a proposal to apply the state sales tax to business services. With that proposal gone, also axed are Dayton's plans to reduce the state sales tax rate, send homeowners $500 apiece in property tax rebates and extend the sales tax to clothing. A lower corporate income tax rate, something for which businesses gave him no credit during Round One, evidently has also been withdrawn.
That leaves an income tax increase for the state's top earners and a cigarette tax increase, Dayton said at the Chamber's Day at the Capitol luncheon in St. Paul. He conceded defeat on one thing more -- a plan to tax "snowbirds" who spend at least six months and one day in another state each year and thereby avoid income tax liability in Minnesota. (Update: I spoke too soon about the snowbird tax. He kept it in his revised budget, released Thursday, but acknowledged that it poses difficulty for Minnesota's summer tourism industry and faces an uphill fight at the Legislature.)
It also kicks off Round Two -- and Dayton's at times stern Chamber address suggests that he intends to play a more aggressive game. He's ready to fight for higher taxes for the sake of improving investment in education, particularly early and higher education, he indicated. He challenged his plan's critics to employ facts, not anecdotes and impressions, as they make their case.
He distributed a six-page handout of charts and graphs containing facts he deems relevant. Among them: Per $1,000 of personal income, Minnesota's total state and local tax burden ranks a respectable 15th, down from 8th in 1996. State and local government revenues as a percentage of total state personal income are projected to decline under his budget to 15 percent in 2015 from a 1994 high of 17.9 percent. Minnesota job growth in 2012 outstripped that of all but 11 other states, including the nation's four lowest tax states (the lowest of which is South Dakota).
Maybe more pertinent in coming weeks: In response to a questioner's complaint that higher income taxes hammer small businesses, Dayton said only 6 percent of the state's businesses that pay taxes via the personal income tax earn enough to qualify for the higher rate he favors. His proposal will mean higher taxes for only 54,000 Minnesotans. Their average taxable incomes are $645,000 a year, he said.
If Dayton stays as feisty as he was Wednesday, those are numbers that Minnesotans will hear often in the two months that remain of the 2013 legislative session.