Gov. Mark Dayton wants to spend millions of dollars to get thousands of Minnesotans back to work.

The bill the DFL governor unveiled Wednesday would pour $775 million into job-generating infrastructure projects and offer tax breaks to businesses that hire unemployed Minnesotans, recent college graduates and veterans.

Dayton said that although the economy is improving and the state is running a small budget surplus this year, unemployment remains too high.

"Despite our economic progress of the last few months, there [are] still 175,000 Minnesotans who are unemployed today," he said. "We have returning Iraq and Afghan war veterans who can't find jobs. We have thousands of young people graduating from our colleges and universities who are also looking for work."

The governor's proposal came two weeks before the start of the 2012 legislative session, where it could run into stiff opposition in the GOP-controlled House and Senate.

Dayton proposed a $3,000-per-employee tax credit for businesses that hire unemployed workers, veterans or recent graduates. The $35 million initiative, which he said could create as many as 10,000 jobs, would be paid for by ending certain tax breaks -- something Republicans historically have opposed.

"While I concur with Governor Dayton's goal to create more jobs in Minnesota, I disagree with an approach that spends more money without addressing needed reform and relies on short-term bonding projects to grow our economy," House Speaker Kurt Zellers said in a statement. The Maple Grove Republican called instead for more business tax cuts and fewer corporate regulations as a means of stimulating job growth.

The meat of the bill is the $775 million bonding package, whose details are to be released next week. Supporters said they hope the bill passes in time for the upcoming construction season.

Minnesota's construction industry "is in more than a recession. It is in a downright depression," said Senate Minority Leader Tom Bakk, DFL-Cook.

The bonding bill will include $20 million in projects requested by the Department of Employment and Economic Development to help businesses expand in Minnesota.

Another $10 million would go to the Minnesota Investment Fund to attract new businesses to the state. Last year, the DFL claims, the fund helped attract $46 million in private investment and 218 new jobs.

Taxes a sticking point

Charlie Weaver, executive director of the Minnesota Business Partnership, said he supports most of Dayton's job-creation proposals, but opposes paying for them by eliminating tax breaks for companies that operate abroad.

Weaver said the tax breaks are crucial for companies that do business overseas, such as 3M, Medtronic and Boston Scientific.

The tax breaks were intended to enhance competition between foreign corporations and Minnesota companies that do business internationally.

"It doesn't make sense to punish one company to give tax credits to another company," Weaver said.

Weaver does support Dayton's proposal to require online-only retailers to collect local sales tax, which would generate $3.5 million in new revenue next fiscal year.

Already struggling retailers nationwide have bemoaned that they are losing business to tax-free Internet sales. Roughly a dozen states have begun forcing online retailers to collect taxes.

Retailers like Richfield-based Best Buy need the state to "level the playing field," said Sen. Kenneth Kelash, DFL-Minneapolis, whose district includes the Best Buy headquarters. The electronic giant's sales slumped in December, in part because more consumers are ordering online.

The idea of slapping a sales tax on online retailers like was floated during last year's special session, but failed to win Republican support.

Jennifer Brooks • 651-222-1288