House wraps $338 million for Mayo Clinic into tax proposal

The Minnesota House is giving Mayo Clinic most of what it wants.

Mayo had asked for about $585 million from the state to help it reinvent Rochester, and on Wednesday the House wrapped $338 million for Mayo's Destination Medical Center project into the $2.6 billion tax proposal it approved on a 69-64 vote.

The money will be paid out over the coming decades, once Mayo, private investors and the local community put up the majority of the cost of expanding its campus and giving downtown Rochester a multibillion dollar makeover.

"There's lots to crow about in this bill," said Rep. Kim Norton, DFL-Rochester, noting that Mayo will pump $3 billion of its own money into the project, matched by billions more in private investment in downtown Rochester. In the end, she said, the new Destination Medical Center project could bring in tens of thousands of new jobs and more than a billion dollars in new tax revenue over the coming decades. "This is growing Minnesota in a way we haven't seen growth for a very long time … I would urge you to support the tax bill for this provision alone."

The Senate continues to debate a significantly different tax plan, and legislative leaders will spend the closing days of the session negotiating a final budget agreement that all sides can live with.

When the House plan finally passed late Wednesday, not one Republican voted for the tax proposal, which the DFLers who control the House hope will repay millions borrowed from public schools, provide direct property tax relief and close a $627 million budget gap.

To do that, Democrats are proposing what would be the most sweeping package of tax increases in at least a decade. House DFLers want to boost income taxes on high earners and then create a temporary surcharge on those making $500,000 a year. The surcharge would bring in $1.2 billion but slingshot the state's income-tax rates to among the highest in the nation.

The proposal also doles out $250 million in property tax relief, including direct payments to homeowners and renters. To drive down property taxes, the plan sends millions in new money to local city and county governments.

For hours, the Republican caucus took to the floor to decry elements of the bill, including the $789 million House DFLers want to raise from new taxes on alcohol and tobacco users; money they say will help offset the costs drinkers and smokers place on state services.

"You're taxing beer, for the love of God," said Rep. Kurt Zellers, R-Maple Grove, who said the bill is "spiteful" and has regressive taxes aimed at the working, and drinking, class.

DFLers say that the increase works out to 7 cents per glass of beer, wine or booze — and that after more than 25 years in which the alcohol lobby has blocked tax increases, it's finally time for a modest one.

The House proposal is a stark contrast from the ones in the DFL-controlled Senate and offered by Gov. Mark Dayton. The Senate is not embracing the alcohol tax or the surcharge, saying a nation-leading income tax — even a temporary one — is not where the state should be. Dayton, who favors an income tax hike on high earners and a tobacco tax increase, spends dramatically less than the House.

House Republicans said that while Democrats promised to raise taxes only on high earners, the proposal raises taxes for all Minnesotans.

The tax proposal is a hallmark initiative for House DFLers. The House plan would pay off the remaining $854 million owed to public schools that the state had to borrow to balance the budget as the state crawled out of the past recession.

The House bill also includes nearly $6 million in new fees, primarily on prepaid wireless telephone services. As part of that, House DFLers are also banking on $480,000 from those applying to restore historic structures.

baird.helgeson@startribune.com 651-222-1288 jennifer.brooks@startribune.com 651-925-5049