Divide widens; vetoes loom

Dayton says he is committed to passing tax increase; GOP readies for near-certain vetoes.

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GOP leaders, from left, Doug Magnus, Amy Koch, Geoff Michel, Matt Dean, Kurt Zellers and Michelle Fischbach conferred Tuesday at the Capitol.

Photo: David Joles, Star Tribune

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DFL Gov. Mark Dayton told Republican lawmakers Tuesday that he is prepared to take the budget fight into next year to get a tax increase through the Legislature.

The statement, in a private breakfast meeting, came shortly before House Republicans defeated the governor's proposal to raise income taxes on Minnesota's richest 2 percent. After hours of emotional debate, the plan went down 60-73.

The vote gave Republicans final proof that their members don't support a tax increase. It gave Democrats a chance to vigorously defend their vision, which includes the higher taxes Dayton wants. Republicans' decision to force votes on the governor's plan was a sign of how far things have melted down.

Meanwhile, lawmakers are readying the rest of their budget bills for the governor's near-certain vetoes. The warring parties have just six days to bridge their gaping divide before the regular session ends on Monday. But Tuesday only moved the them further apart.

Barring agreement, a special session will be needed to settle the state's two-year spending plan and solve a $5 billion deficit. There is little sign an agreement could come even in June. If they can't agree by July 1, the state's government would begin shutting down.

No 'surrender' from Dayton; no taxes from GOP

Dayton said Tuesday that he will not "surrender" to Republicans' demand that he cut the budget down to their level, and he was "pessimistic" about a resolution. Republicans got the word at the private breakfast.

"He [said he] would hold out through a special session, through a shutdown, for a tax increase," said Deputy Majority Leader Geoff Michel, R-Edina. He said Dayton told them "he would hold out until 2012 for a tax increase...that's exactly what he said."

The governor said he may have been hyperbolic and wasn't promising a shutdown, but he wanted to convey his determination.

"They believe I'm going to fold or cave or give in," Dayton said. "My resolve is every bit as great as theirs....I've never been involved in a shutdown, and neither have they....Certainly, it is not something I've decided in any way I'm going to do or not do. But I did want them to understand how firm my resolve is."

The message got through. Soon after the breakfast meeting, lawmakers returned to the Capitol to begin passing their own version of a budget. Theirs includes no tax increases or extra revenue and cutbacks in nearly all services.

The House started the day by taking up Dayton's revamped tax increase proposal. His new plan would hike taxes on couples with taxable income of $250,000 or more and singles earning $150,000 a year or more. He started the year with a plan to raise $3.4 billion through taxes. His new plan would raise $1.8 billion. Republicans said they were repelled by the idea.

Rep. Mary Franson, R-Alexandria, accused Democrats of using "big, fancy words," so she relied on little ones: "We are not going to raise taxes."

DFL Rep. Ryan Winkler, DFL-Golden Valley, retorted: "I'll try not to use big, fancy words like 'shared sacrifice,' because they are incomprehensible to your side." He accused Republicans of delusively denying the true effect of their plans and of spreading myths about tax impact.

House Taxes Committee Chair Greg Davids said Democrats are the delusional ones.

"The governor's proposal taxes everyone that buys something. ... The myth is that only the [top] 2 percent get hit," the Preston Republican said. He said Dayton would raise taxes on businesses that would pass those hikes onto consumers.

One after another, DFLers gave Dayton's tax plan the robust defense they had earlier denied it. In the end, only one DFLer -- Rep. Gene Pelowski, of Winona -- voted against the tax hike measure.

Readying bills to meet vetoes

The bickering continued into the night, with Republicans teeing up bills almost certain to be vetoed.

The Senate approved plans to redraw the state's congressional and legislative districts, but Dayton has repeatedly said he won't sign any redistricting plan that lacks bipartisan support. No DFLers voted for the plan that was drawn up solely by Republicans. That means redistricting will likely fall to the courts, as it has for decades.

Lawmakers also plan to send Dayton measures restricting abortion that he will likely veto. He said he stands with law enforcement and against a National Rifle Association-supported bill that would expand allowances for self-defense.

Then there's the budget. As the sun went down Tuesday, after a day of bitter back-and-forth, lawmakers began to route budget bills to Dayton.

The Senate approved the omnibus bill on jobs and economic development, which includes about $168 million to finance the state's Department of Employment and Economic Development, the Department of Labor and Industry and the state's Housing Finance Authority. Later, senators also approved the budget bill to pay for the state's courts and public safety agencies. Nearly half of its $1.7 billion cost would pay for corrections, including the state's prisons.

A few hours before his State Government budget bill was sent to the governor, Sen. Mike Parry, R-Waseca, said: "I can tell you, according to [Management and Budget Commissioner Jim] Schowalter, state gov will be vetoed."

Staff writers Eric Roper and Mike Kaszuba contributed to this report. Rachel E. Stassen-Berger • Twitter: @rachelsb Bob von Sternberg • 651-222-0973

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