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Higher taxes on rich part of House plan

Rep. Paul Marquart of Dilworth Monday explains property tax provisions in a House taxes bill. On the left is Rep. Lyle Koenen of Clara City.

ST. PAUL - Minnesotans earning more than $300,000 a year would pay a higher income tax and the Job Opportunity Building Zones program would be partially dismantled under a House Democratic-Farmer-Labor tax plan.

The bill, unveiled this morning, would raise $468 million in the next two years by raising income taxes on the rich. In all, the bill increases taxes $1.5 billion in the two-year budget that begins July 1.

The proposal would increase taxes on beer, spirits, malt beverages and wines from 2.5 to 5 percent for $42 million. A separate provision would increase liquor taxes by another penny a drink.

Tobacco taxes also would go up; cigarettes, for instance, would be taxed 54 cents per pack of 20 cigarettes more than under current law.

Also, the House bill would eliminate a limit on how much property tax levies could rise in cities and counties. Counties could increase sales taxes by a half percent instead of raising property taxes.

Local governments, which would have fewer state mandates under the bill, would be given slightly less state aid, but Rep. Paul Marquart, DFL-Dilworth, said city aids would return to 2009 levels in two years.

Rep. Morrie Lanning, R-Moorhead, wrote provisions that would eliminate the now-mandated truth in taxation hearings local governments must hold to give the public a chance to comment on proposed taxes. However, governments would be required to let taxpayers know about other meetings when they can provide input.

While House leaders set $1.5 billion as their figure to raise taxes, as part of plugging a $4.6 billion budget deficit, the Senate on Tuesday releases a plan that raises taxes $2 billion.

Republican Gov. Tim Pawlenty refuses to back any tax increase, but he increases revenue by $1 billion by borrowing money to help operate the state.

Pawlenty's JOBZ program takes a hit in the House bill. The program is designed to give major tax breaks to businesses locating in many rural areas. The bill eliminates the breaks given for income and corporate franchise taxes.

House Taxes Chairwoman Ann Lenczewski, DFL-Bloomington, said the bill being considered eliminates what the state cannot afford, what is not fair and what is not working.

Among its proposed changes are elimination of several tax breaks that mostly wealthy Minnesotans get.

Lenczewski said the higher tobacco and liquor taxes are designed to help the state pay for health-care costs associated with smoking and drinking that "cost all Minnesotans."