The Senate's passage of the bill is no guarantee the tax changes will become law.
The Minnesota Senate approved a package of income, property and sales tax hikes Monday — just barely — after a pair of votes that showed the political difficulty for Democrats of raising taxes even when they fully control state government.
The debate on the DFL-sponsored Senate tax bill took a turbulent turn when a group of Democratic senators mostly from suburban districts joined minority Republicans to defeat it. It's extremely rare for the party that controls the Legislature to fail to pass a budget bill, and it led to a few minutes of confusion on the Senate floor as DFL senators rushed off to meet privately.
"It should have failed, and today it did," said Sen. Julianne Ortman, R-Chanhassen. She and fellow Republicans tarred the bill as a massive tax increase that most Minnesotans would feel in their pocketbooks.
But the bill's death was short-lived thanks to a parliamentary maneuver: One of the senators who voted no moved to reconsider its defeat and vote again. That motion passed, and two DFL senators who initially voted no switched to yes: Greg Clausen of Eagan and John Hoffman of Champlin. A third Democrat who failed to vote the first time also voted yes, giving it 35 votes after it mustered only 32 the first time.
The bill raises $1.8 billion in new revenue through a wide-ranging menu of tax hikes. An estimated 200,000 Minnesota tax filers, or about 7 percent, would pay a higher income tax — averaging $2,300 per return. The state's top rate would rise from the current 7.85 percent to 9.4 percent on taxable income of more than $140,960 for married couples and $79,730 for individuals. It lowers the state sales tax rate from the current 6.875 percent to 6 percent, but adds it to a number of purchases now exempt — including clothing, as well as services that include piano lessons, auto repairs and haircuts.
The bill adds 94 cents to the state's $1.58-a-pack cigarette tax. It would also raise the state's impose a new 13 percent tax on sales of sports memorabilia, such as jerseys, trading cards and bobble-heads, to help pay for youth sports and potentially shore up a weak financing plan for the planned Minnesota Vikings stadium. And some businesses would see a state property tax increase.
The Senate's passage of the bill is no guarantee the tax changes will become law. The plan differs significantly from a House tax bill, and DFL Gov. Mark Dayton — while also seeking income tax hikes on the wealthy — has said the Senate's proposed hikes would reach too far down into middle incomes. Dayton also isn't backing the sales tax changes. The next step is a House-Senate conference committee where lawmakers from both chamber will negotiate a final proposal.
Even DFL senators who backed the bill acknowledged it was a difficult vote. But they said the money raised in the bill would let the state balance its budget while also directing new money to services that Minnesotans say they want: all-day kindergarten at schools statewide, tuition help for college students, and aid to local governments that the bill's sponsor said would help relieve pressure on local property taxes.
"We came here to make some tough decisions to pay for the things that we value," said Sen. Patricia Torres Ray, DFL-Minneapolis. The bill also includes tax breaks for a handful of private businesses planning significant expansion in the state: Mayo Clinic, 3M Co., Baxter Healthcare Group and Mall of America.
Republicans largely ridiculed the bill, saying the money raised would fuel wasteful spending and that the tax hikes would hit far more Minnesotans than just the wealthiest.
"This is a tax attack on anyone that lives in Minnesota or even puts a foot in Minnesota," said Sen. Paul Gazelka, R-Brainerd. Republicans said the heavier tax burden would discourage new business growth and job creation.
Only one Republican senator backed the bill: Sen. Dave Senjem of Rochester, who cited the Mayo Clinic tax break. On the first vote, seven DFL senators defected to vote against it. Besides Clausen and Hoffman, they were: Terri Bonoff of Minnetonka, Melisa Franzen of Edina, Vicki Jensen of Owatonna, Susan Kent of Woodbury and Bev Scalze of Little Canada.
Senate Majority Leader Tom Bakk said that in the brief meeting between the two votes, he stressed to the mavericks that without the money raised by the tax bill that there wouldn't be enough to pay for everything Democrats want to do. He said he didn't have to twist arms and that several volunteered to vote yes the second time.
"Passing tax bills, it's always the hardest vote of the session," Bakk said.
Clausen said he volunteered to reverse his vote because he strongly supports the spending increases for education, the he opposes the new sales tax on clothing and services.
"In order for those things to happen, we needed to raise additional revenue," Clausen said. "I don't want to put those things in jeopardy. I think those are too important to our state."