Republican legislators are dropping their call for about $200 million in tax cuts in hopes they can get DFL Gov. Mark Dayton to abandon his proposal for $1.8 billion in tax increases.

"This is a major compromise," House Speaker Kurt Zellers, R-Maple Grove, said Thursday. He and Senate Majority Leader Amy Koch said relinquishing the tax cuts, a bedrock campaign promise, was a tough move that some of their GOP colleagues do not support.

Dayton said the proposal was no compromise. He called the offer, which does not increase Republicans' proposed state spending at all, "extremely, extremely disappointing."

The continuing stalemate pushes the state closer to an unprecedented government shutdown on July 1, which could shutter parks, threaten nursing homes and halt payments for schools. The state's leaders would need to agree on a two-year state budget by the end of the month to avoid that possibility.

Dayton said that shutdown looms even larger after Republicans' "irresponsible" proposal.

"Once again their position, implicitly, is I have [to] agree entirely to them. I have to give up 100 percent of everything I believe in and am convinced is right for the people of Minnesota and cave in to their offer or there's not going to be an agreement," Dayton said.

The offer

Although Republicans framed the offer as a painful concession after a bruising intra-party debate, it does not move them off insistence that the state cap spending at $34 billion in the next two years. That refusal to budge is a deal-breaker for Dayton, who wants to spend about $2 billion more. Last month, he dropped his proposed tax hike by about $1.8 billion, which means only the top 2 percent of earners would see a tax hike. The GOP said their latest offer expires at the end of business Monday.

The GOP plan would send the money for tax cuts to higher education, public safety, education and the environment, along with boosting state aid mostly to cities and counties. The offer still leaves Republicans and Dayton about $1 billion apart on spending on human services and about $1 billion apart on spending for state aid to local governments.

The largest chunks of tax cuts Republicans sought were $122 million to make Minnesota conform with federal tax laws and another $50 million in business property tax deductions.

Republicans said abandoning that led to some "extremely" tough conversations inside Republican circles. Koch, of Buffalo, said Deputy Senate Majority Leader Geoff Michel of Edina told her he may not vote for the measure if it comes to the Senate floor.

"I'm going to get that vote," she said with a smile.

'Complete non-offer'

The day highlighted the months of deep divide between Dayton and the GOP. Only a few hours after Republicans declared their proposal "significant," Dayton called it a "complete non-offer."

"It's not significant at all," the governor said. "Significant is meeting in the middle."

He said Republicans raised his expectation they were ready to move toward his offer, which he said rendered Thursday one of his most disappointing days at the Capitol.

He said the day's lack of movement brings the state closer to shutdown. Republicans have accused him of wanting a shutdown to force a tax hike and he said Thursday he didn't see Republicans making any moves to avoid a shutdown.

He said Republicans' offer amounted to no more than a "public relations ploy" and rearranging deck chairs on the Titanic.

The governor said he was flummoxed why the GOP insists it would rather cut programs across the state than raise taxes on the top 2 percent of Minnesota earners.

Highlighting his frustration, Dayton said he did not know where to go from here.

"I don't know. I really don't," Dayton said.

Rachel E. Stassen-Berger • Twitter: @rachelsb