U.S. News

Minn. Democrats want higher taxes for wealthy

MARTIGA LOHN|Associated Press Writer

The Legislature's top Democrats pushed Monday to send new income taxes for the wealthiest Minnesotans to a tax-averse Gov. Tim Pawlenty as part of their plan to wipe away a $2.9 billion deficit.

The $395 million proposal — unveiled at a morning news conference and rushing toward floor votes in both chambers later in the day — reignited a familiar fight between anti-tax Republicans and Democrats who say the deficit-riddled state needs new sources of cash.

Lawmakers and Pawlenty are hard-pressed to balance the budget before the state constitution requires the legislature to adjourn next week. The state Supreme Court made the crisis more acute last week when it said Pawlenty exceeded his authority last year when he ordered budget cuts without legislators' approval.

With the Republican governor and top legislative Democrats far from reaching a budget deal, Democrats planned to use their large majorities in both chambers to pass the tax bill. House Speaker Margaret Anderson Kelliher said the vote had to be Monday to leave enough time to try to override a veto with GOP help. Top Republicans said their members won't vote to override.

Pawlenty promised to veto the bill, which he said would give Minnesota the nation's fifth-highest income tax rate and hurt small businesses.

"The DFL's proposed tax increase is like Jason in 'Friday the 13th' — it's scary and it keeps coming back," he said in a statement.

Earlier, Senate Majority Leader Larry Pogemiller said he doubted Pawlenty's position had changed.

"I have no reason to believe that he's become flexible or willing to compromise," he said.

The proposal would establish a new income tax bracket for the highest-paid taxpayers. Couples filing jointly would pay a 9.1 percent tax on income topping $200,000 after deductions and credits. The higher rate also would apply to taxable income of more than $113,100 for singles and more than $170,350 for heads of household.

The bill also would roll back $40 million worth of President George W. Bush-era state income tax cuts for high-income taxpayers a year earlier than scheduled.

Senate Taxes Committee Chairman Tom Bakk said the new taxes would affect 122,000 filers for 2010 taxes payable in 2011. He said 97 percent of that group has taxable incomes of $250,000 or higher.

The tax plans are part of a deficit fix that includes $680 million in spending cuts and $1.7 billion in delayed payments to public schools, largely mirroring the reductions Pawlenty made last year.

Enacting the cuts would avert a cash crunch that could result from schools, cities or other groups touched by Pawlenty's cuts seeking reimbursement of that aid after last week's court decision.

Top Democrats said the new taxes will cushion schoolchildren and college students from the state's financial problems. They said they accepted most of Pawlenty's budget plan and hope he will bend.

"Those that would like to boil this down to whether taxes will be increased or not are oversimplifying the problem and the fiscal situation we're in right now," House Majority Leader Tony Sertich said.