Dayton offers new tax plan; Republicans reject it

Six days into a state government shutdown, DFL Gov. Mark Dayton unveiled a new proposal Wednesday aimed at breaking the budget impasse.

But Republicans quickly dismissed Dayton's plan, which still relies on tax increases. They also characterized the negotiations as taking a step backwards.

Dayton presented Republicans with two budget options. The first includes an income tax increase on Minnesotans earning more than $1 million a year, but it would be temporary instead of permanent. The second replaces that proposal with a $1-per-pack tax increase on cigarette purchases.

Both options include an additional K-12 payment delay, health care surcharges and tax reform measures.

Dayton has consistently pushed for an income tax increase as part of the solution to a projected $5 billion state budget deficit. But in an effort find a budget resolution, Dayton said he offered an alternative.

"After the income tax, there aren't any good taxes in my view," said Dayton. "The only real sources of permanent revenue are property taxes, sales taxes and so-called sin taxes."

Republicans rejected the plan, saying they don't like either of the proposed options. House Speaker Kurt Zellers said the governor's latest offer was very disappointing

"Adding additional tax increases at this point, it's pretty clear to us that things went backwards today," said Zellers. "It's very disappointing five days in, the only solution we got from the governor was another tax increase followed by a second tax increase. The cigarette tax increase is probably one of the more regressive sales taxes."

"How do our members go back home and say, 'We gave up on all our principles to the governor?'"

Even with state government shut down, Zellers said Republicans will continue to stick to their campaign promises of no new taxes. He said they'll also hold the line on state spending.

"How do our members go back home and say, 'We gave up on all our principles to the governor?'" said Zellers. "It's not about wins and losses. It's about keeping your word to the people who elected you."

Zellers and Senate Majority Leader Amy Koch are still pushing Dayton to itemize where he plans to spend additional tax revenue if he had it. They want to know more about his spending priorities in every budget category.

Koch said she's disappointed that the governor didn't include those details as part of his new budget offer.

"We appreciate that he's making an offer, but there's just still no detail," said Koch. "And it just seems to be trying to get to a number, which is ... almost $1.5 billion more in revenue."

Republicans continue to urge the governor to call a special session to allow them to pass a "lights on" bill that would keep state government functioning. They argue that broader budget negotiations could then continue.

In his latest offer, Dayton said he would call a special session for a "lights on" bill as soon as Thursday evening, if they could agree on the overall budget framework.

But after hearing about the GOP rejection of his offer, Dayton challenged Zellers and Koch to quickly come up with another alternative.

"If they don't like the proposal I made today, then I look forward to their response," said Dayton. "It's going to involve compromise on both sides, as I've been saying. And if they're just going to reject every proposal that doesn't conform to exactly what they want to do, then they're basically saying again, 'Our way or no way,' and that's not responsible leadership."

For now, Dayton and Republican leaders don't have any more negotiations sessions scheduled. But commissioners and committee chairs are scheduled to meet Thursday to work on the K-12 education funding bill.

Both sides say they're close to a spending number for that bill, but there are significant policy differences.

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