Minnesota GOP's 'no new tax' unity fraying a bit

Minnesota Republican legislators swept into power with an ironclad pledge to beat back the deficit solely through cuts.

But the realities of taming the $5 billion projected deficit have revealed cracks in what once seemed a bulletproof political shield. Now a battle within the party on how firmly to stick to its ideals is spilling into public view.

In a letter to lawmakers, Republican Party chair Tony Sutton said: No new revenue. Not from taxes, not from fees, not from gambling.

Not everyone is falling into line.

The House tax committee chair has a plan to bring $300 million to the state's coffers by capping HMOs' profit on business they do with the state.

His Senate counterpart has looked at ending certain tax breaks and broadening the sales tax. A few Republican lawmakers want to expand gambling; others have an eye on reducing some taxes and upping the bite on others.

"If somebody comes along with an idea that makes sense, I am not closed to a good idea," said Rep. Bud Nornes, R-Fergus Falls.

Sutton says that's not enough.

"There comes a time when you have to say: Look, this is what we believe in and this is what we think is best for the state," he said.

He acknowledged that Republican Gov. Tim Pawlenty once proposed expanded gambling and often upped fees -- the same type of revenue Sutton now wants barred from consideration.

Sutton said Tuesday that he fired off his directive to lawmakers because he was hearing "a lot of chatter at the Capitol" about raising revenue and wanted to tamp that down.

But some lawmakers just don't want to be tamped.

"What I'm looking at is balancing the budget without increasing taxes," he said.

He calls his proposal the "Davids 6 percent solution." It would cap HMOs' profit at 6 percent on government business. The excess would come back to the general fund.

Senate Taxes Chairwoman Julianne Ortman, R-Chanhassen, has also been busy.

Ortman and Sen. Ann Rest, DFL-New Hope, are co-sponsors on a bill that would tax some online sales, which could boost revenue by $30 million to $50 million. Ortman said she is not sure even she would support the bill but introduced it because she wanted a full discussion of the possibility.

"People are really focused on the spending side right now," said Ortman.

During her 2010 reelection campaign, however, Ortman said she wanted to rewrite the state's tax code.

"I'm not certain we can cut deeply and quickly enough to recover the entire shortfall," she wrote on her campaign website.

"We should reform our tax policies and reconsider the massive exemptions we have in place that allow certain folks preferential treatment."

She said Tuesday that she is not sure that will happen this year.

The idea of revamping the tax code still has some fans.

Rewriting the tax code, Garofalo said, "will raise you revenue, but it's not a tax increase in the traditional sense."

Baird Helgeson • baird.helgeson @startribune.com Rachel E. Stassen-Berger • rachel.stassen-berger@startribune.com