Surprising no one, the commission organized by Walter Mondale said Thursday that tax increases are the way to solve the Minnesota budget impasse that has shut down the state government for a week.
Mondale’s bipartisan group of six took only two days to recommend a 4 percent, across-the-board income tax hike on all Minnesotans, an increase in the cigarette tax by $1.29 per pack and a boost in the alcohol tax. Over time, they also want fewer items to be exempt from the sales tax.
But it seems unlikely to make things move. Democratic Gov. Mark Dayton, who campaigned last year on a “tax the rich” mantra, quickly put out a statement disagreeing with the group’s call for an across-the-board income tax hike. He wants only the wealthiest two percent to pay higher income taxes.
Outlining his critique of the recommendations from a commission he otherwise praised, Dayton took yet another shot at Tim Pawlenty. Pawlenty’s increases of the overall tax burden on middle and lower class Minnesotans as governor, Dayton argues, make his proposed increase on the rich a matter of fairness.
“Most other Minnesotans are already over-taxed, due primarily to the 75% increase in property taxes statewide during the previous eight years,” he said.
The former Democratic vice president did not himself sit on the panel, but he convened the group along with former Republican Gov. Arne Carlson, announced its formation a Tuesday morning press conference and put his full weight behind it. The six members have both business and legislative backgrounds, and have worked on state budgets for both administrations.
The group released a presentation Thursday afternoon calling for cutting state spending by $3.6 billion from projections. This would mean that 70 percent of their short-term budget solution would come from spending cuts, and only 30 percent from revenue increases. That, though, still means a 1.5 percent year-over-year state spending.
The group also said the income tax increase should only be temporary, lasting only the next three calendar years.
Meanwhile, the two lead Republican negotiators formally rejected Thursday a proposal offered the day before by Dayton to increase the cigarette tax by $1-per-pack.
A Republican spokesman did not immediately respond to an email seeking comment, but the leaders’ initial response to the group’s formation indicated that there will be little appetite for the proposal.
Citing the budgetary problems, Fitch downgraded the state’s credit rating from AAA to AA+. Minnesota’s finance agency, announcing the news Thursday afternoon, said the cut happened because of a failure to deal with the structural deficit and warned that the news will increase borrowing costs.
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