Dayton retools budget as poll indicates public approval lagging

When Dayton unveils his new budget proposal this week, the plan will lean heavily on a tax hike for the wealthiest 2 percent of Minnesotans and he is strongly considering a significant bump in the tobacco tax, sources say.

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Gov. Mark Dayton

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Gov. Mark Dayton is intent on raising income taxes on high earners in Minnesota even as he jettisons parts of an ambitious tax overhaul package that has stirred division at the State Capitol for weeks.

When Dayton unveils his new budget proposal this week, the plan will lean heavily on a tax hike for the wealthiest 2 percent of Minnesotans and he is strongly considering a significant bump in the tobacco tax, sources say.

The DFL governor is likely to use the extra money to wipe out the deficit and pay for new education initiatives, boost aid to local governments and increase money for public safety.

Dayton convened his top budget and tax officials Saturday morning to map out a new path forward. This came after weeks of damaging criticism from business leaders that finally prompted him to announce Friday that he would scrap his sweeping tax overhaul and craft a more modest proposal.

Dayton’s retreat comes just as a new Star Tribune Minnesota Poll shows his public popularity at its lowest level since taking office two years ago.

“My goals were to reform taxes overall in Minnesota and to make taxes fairer for middle-income families,” Dayton said, highlighting his income tax hike for high earners. “That’s what I have been championing in Minnesota for four years, before I was elected, after I was elected and continue to.”

The poll, meanwhile, found that negative impressions of the governor have ticked up, as well.

Dayton’s approval rating fell to 45 percent in a statewide survey conducted late last month, before Dayton scrapped his tax plan, the poll found. That compares with a rating of 53 percent in September.

‘Businesses are concerned’

Dayton’s budget proposal was the culmination of more than a year of meetings around the state, spawning a profound realigning of the state tax system.

In the end, Dayton withdrew the plan after just six weeks, before he could tour the state to sell the proposal and before it faced any significant legislative tests.

The governor remains fiercely committed to his campaign pledge to raise taxes on individuals with a taxable income of more than $150,000.

That new money would help erase the projected deficit of $627 million, which state budget officials just lowered from $1.1 billion.

But the state’s improving fortunes are now giving Republicans traction to fight the rest of Dayton’s tax package.

“Businesses are concerned about these taxes,” said Senate Minority Leader David Hann, R-Eden Prairie. “These things are an additional burden on the economy, which is already struggling.”

Dayton was already telling fellow DFLers, who control the Legislature, that he did not expect his sweeping package to become law. Soon after he released his budget outline, he gathered with DFL legislators in a rare private meeting.

According to several accounts, he told legislators that this was his best shot at major tax reform but that he expected there would be parts legislators would not accept.

“I said from the outset, mine is the first word in this discussion,” Dayton said. “I never thought my proposal was going to pass through the legislative process and become law, as initially proposed. It was to launch a discussion.”

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