Taxes, budget big topics at Chamber of Commerce event

Gov. Mark Dayton's administration asked business leaders Wednesday to engage in the upcoming legislative budget fight and find ways they could work together.

"We are eager to work with you, and the Legislature, to balance the state's budget responsibly and fairly; to make our tax system more fair," Dayton chief of staff Tina Smith told hundreds of attendees at a Minnesota Chamber of Commerce legislative session preview dinner.

But in a room that included many who opposed the governor, Smith said that increased tax revenue must be part of the solution to the state's long-term budget problems. Even with a list of government reforms implemented or in the works, the state faces a $1.1 billion shortfall the next two years.

"Step by step, program by program, in big and small ways, and with the great ideas and support of state employees, we are changing how state government works," Smith said. "But fair, progressive, sustainable revenue also needs to be part of the solution."

Usually the current governor gives the talk at the annual dinner, but Smith had to cover for Dayton as he recuperates from back surgery.

The governor is expected to release his two-year budget proposal in a couple weeks, which is expected to include more government reductions, but also income tax increases for high earners

Many Republicans and business leaders in the Chamber of Commerce have firmly opposed the proposal, saying it would unfairly target thousands of Minnesotans who run their small businesses through their personal income taxes.

Republican leaders maintained their opposition to tax hikes, but would not predict how likely it is that new revenue will be part of the final budget deal.

"We shouldn't be rushing to tax increases," said House Minority Leader Kurt Daudt, R-Crown. "If you look at the economy, we are heading the right direction."

Democrats told attendees that the state tax system is no longer fair, with too little reliance on the income tax and far too much reliance on property taxes. They said years of state budget reductions forced school districts to rely on boosting local levies, which are part of the reason property taxes have soared.

"The Senate will try very hard to buy down some of those school levies," which will eventually help all business owners, said Senate Majority Leader Tom Bakk, DFL-Cook.

With Democrats now in charge of the Legislature and the governor's office, many Republicans are concerned there is nothing to block tax hikes.

Smith noted that two years ago, the chamber membership warmly welcomed her boss. She said that the reception was probably so warm because Republicans had control of the Legislature.