Dayton hits the stump, championing his budget proposals

DFL Gov. Mark Dayton pitched campaign-style for his new budget proposal Tuesday, lashing out at Republicans who called his property tax rebate plan a re-election ploy.

"It's a little early in the two-year process to be making crass cracks," Dayton said after speaking to 150 leaders of Minnesota's credit unions.

Dayton is working to fire up support for the most comprehensive reshuffling of the state tax system in decades. The proposal calls for billions of dollars in new revenue, including higher income taxes on the state's wealthiest residents, a boost in cigarette taxes and a historic expansion of the sales tax that would include clothing.

To garner favor, Dayton's plan also calls for a direct $500 property tax rebate for all homeowners.

State Sen. Julianne Ortman, R-Chanhassen, said the rebate check is an election-year gimmick that will arrive in mailboxes during what is likely to be a tough gubernatorial race.

Calling Dayton's entire budget "a great deception," Ortman, a former Senate Taxes chairwoman, said the proposal "raises taxes on the middle class and the poorest of the poor, just so you can give back to property taxpayers."

Dayton noted that Ortman was a key backer of a plan that wiped out a rebate program, triggering property tax hikes for many homeowners.

While Dayton was out selling his budget package, his staff was back at the Capitol trying to tamp down criticism of his proposal to charge sales tax on clothing. Staff members passed out a one-page "fact check" explaining that the tax on clothing applies only to single items sold for more than $100, not a cumulative total of the bill.

That means a consumer who buys a $150 jacket would pay the new, lower sales tax rate of 5.5 percent on the item, totaling $8.25. A customer who buys three shirts for $50 each, for a total of $150, would pay no sales tax.

Minnesota Revenue Commissioner Myron Frans told the Senate Taxes Committee that the sales tax on clothing proposal is not perfect. State officials expect retailers to try to outmaneuver the system by splitting up items that crest the $100 threshold.

"When you have a number like that, you have that problem," Frans said. He also noted that the state loses more than half of the projected revenue from a tax on clothing by setting the minimum amount at $100.

Dayton acknowledged that his plan is less than ideal. "There's plenty of things I don't like about my proposal," he said Tuesday. "It's just that I like the alternatives worse."

While Dayton fended off criticism, some of his strongest union allies were ramping up support of his budget.

"We were delighted that the governor proposed a strong budget, the strongest one we've seen in years," said AFL-CIO president Shar Knutson on Tuesday. "There aren't any gimmicks. ... It makes a difference to middle-class working families, because for such a long time these families have taken on the burden of any additional taxation."

Dayton released his budget more than a week ago, but details continue to trickle out.

A new report by Minnesota Management and Budget shows the plan calls for $45.3 million in additional fees over the next two years.

Sources for the new money range from additional commercial animal waste technician license fees to modified mortuary science regulations to a combative sports fee increase.

The governor challenged Republican legislators who have been critical of the proposal to find better solutions.

"Where are you going to cut? Who are you going to cut? How much?" he asked. "These are tough decisions, and there are no get-out-of-jail free cards."

Staff writer Jim Ragsdale contributed to this report.