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PoliGraph: Tax bill raises taxes on some, not all

Posted at 2:00 PM on May 24, 2013 by Catharine Richert (3 Comments)
Filed under: PoliGraph

This year's legislative session may be over, but that doesn't mean you'll be hearing less from state lawmakers.

Over the next few months, expect Republicans to hone this talking point in the run-up to the 2014 elections: Gov. Mark Dayton and the Legislature broke a promise to tax only the state's wealthiest because they've passed a bill that includes taxes that will affect everyone.

Versions of this talking point have already surfaced on Twitter with the hashtag #taxeveryonebudget, in press conferences and in videos.

In fact, the effects of those new taxes are more complicated than that.

The Evidence

Earlier this week, the Legislature approved a $38 billion two-year budget that erases the $627 million budget deficit. That's partly because the Legislature also approved $2 billion in new revenue, which is partly funded through an income tax increase on Minnesota's wealthiest 2 percent.

That's something Dayton said he would do since he ran for office in 2010: raise taxes on Minnesota's top earners to make up for the budget shortfall.

But the Legislature also approved other taxes that could affect a broader segment of the state's population.

For instance, the bill raises the cigarette tax by $1.60 per pack. Dayton has acknowledged that the tax is regressive - meaning that it will hit lower income Minnesotans hardest - but that he decided to back the idea because he believes it will discourage people from smoking.

And it imposes the state sales tax of 6.875 percent on some business-to-business services, including telecommunications equipment, industrial equipment and warehousing and storage, among other things. The statewide sales tax is on top of local sales taxes, too.

But whether the average consumer feels the effects of the service taxes isn't clear.
Red Wing Shoes opposes the new tax, which Marketing and Communications Director Peter Engel says could mean a 7 percent increase in the company's annual costs.

Right now, Red Wing is deciding whether open a new warehouse facility in Minnesota or in Missouri, where the company also produces boots and where there is no business-to-business tax. Minnesota is already poorly located for shipping shoes across the country, Engel said.

"You add tax on top of that in terms of factors that will influence the location, and it negatively affects the Minnesota opportunity," Engel said.

But will the cost be passed on to consumers? Not necessarily, said Engel. Red Wing boots are already expensive.

"We're going to have to decide, 'can we pass that on or are we going to have to find a different warehousing solution,'" Engel said. If the company decides to relocate its warehouse to Missouri, some of the jobs at the Red Wing warehouse would disappear.

Beth Kadoun, director of tax and fiscal policy for the Minnesota Chamber of Commerce, says the state could also see businesses that provide the services subject to the sales tax leave the state, which could mean job losses.

Corporate tax revenue will also increase because the bill ends some corporate tax breaks. The Minnesota Department of Revenue predicts that doing so may result in a combination of higher costs for consumers, lower wages and smaller profits for business owners. A lot will depend on whether a business decides to absorb those costs or pass them along to customers.

Meanwhile, other taxes that would have affected most Minnesotans were dropped from the final bill, including a tax on alcohol, a gas tax and sales taxes on transit.

The Verdict

Republicans say that tax changed approved by the DFL Legislature and Dayton will affect everyone.

But that's too simplistic. The income tax increase will only affect Minnesota's wealthiest, the cigarette tax will only affect people who smoke, and the business-to-business services tax may result in job losses, not necessarily higher prices for consumers. And while changes to the corporate tax code could mean consumers are shelling out more cash for some products, the Department of Revenue can't say how much or for which products.

This claim is misleading.

SOURCES

Minnesota Public Radio, Budget in hand, Legislature adjourns, by Tim Pugmire, May 21, 2013

Minnesota Department of Revenue, Selected Sales Tax Items, May 20, 2013

Minnesota Department of Revenue, GOVERNOR'S Supplemental Budget Tax Proposals
HF 677 (Lenczewski) and SF 552 (Skoe), revised May 11, 2013

Ryan Brown, Minnesota Department of Revenue

Beth Kadoun, Minnesota Chamber of Commerce

Peter Engel, Red Wing Shoes

(3 Comments)

Dayton signs slew of bills

Posted at 3:56 PM on May 23, 2013 by Tim Pugmire (0 Comments)
Filed under: MN Legislature, Mark Dayton

Gov. Mark Dayton has signed the tax bill and the budget bills that state lawmakers sent to him in the closing hours of the 2013 session.

A news release from the governor's office today said he signed the bills to finance environment/agriculture, jobs/economic development, health/human services, public safety/judiciary, state government/veterans and transportation.

The tax bill will raise $2 billion in new revenue, most of which comes from increases in the income tax for top earners and the cigarette tax.

He also signed bills signed relating to data practices, election law changes and public pensions.

Earlier in the day, Dayton signed a bill allocating Legacy amendment sales tax revenue after vetoing two projects it would've funded. He signed the E-12 education bill Wednesday during a brief ceremony at the State Capitol.

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Dayton strikes two projects from legacy bill

Posted at 11:56 AM on May 23, 2013 by Tim Pugmire (0 Comments)
Filed under: MN Legislature, Mark Dayton

Gov. Mark Dayton used his line-item veto authority to remove two contentious projects from the Legacy Bill passed by lawmakers on the final day of the session.

Dayton removed a $6.3 million allocation for metropolitan regional parks and $3 million to stop aquatic invasive species, according to a statement released by his office this morning.

Several legislators, the Nature Conservancy and nearly two dozen other habitat and sportsmen's groups had requested the projects be removed, because neither was endorsed by the Lessard-Sams Outdoor Heritage Council, which is a citizens panel that helps to decide how legacy amendment sales tax revenue is spent.

In a letter (posted below) to House Speaker Paul Thissen, DFL-Minneapolis, Dayton said the decision was extremely difficult.

"I have given contradictory assurances to legislators during the past few days and to thousands of Minnesotans during the past few years," Dayton wrote. "I have decided that I must honor my promise to those citizens."

Dayton also noted a high level of acrimony and distrust between legislators and concerned citizens over the issue.

"The bitterness is not about the merits of the two projects I am vetoing, but rather the way in which they were added and other significant changes proposed to the House bill."

Dayton also recommended that the leadership of the House Legacy Committee, which is chaired by Minneapolis DFL Rep. Phyllis Kahn, repair its relations with the Lessard-Sams council and outdoors groups.

Kahn said the advisory group rejected the proposal without recognizing its benefits; she said the metro area provides important habitat.

"The metropolitan area is a major part of the Mississippi flyway, which is the most internationally renowned part of Minnesota state's natural heritage map," Kahn said. "That duck that gets shot in Crow Wing County probably stopped for lunch and breakfast in Hennepin County and Dakota County."

MPR reporter Stephanie Hemphill contributed to this report.

Dayton strikes two projects from legacy bill by Minnesota Public Radio

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Poll: Dayton's approval numbers slide, but still leads in 2014

Posted at 11:54 AM on May 23, 2013 by Catharine Richert (0 Comments)
Filed under: Campaign 2014, Governor's Race

Gov. Mark Dayton's approval numbers have dipped in recent months, according to a new poll by Democratic firm Public Policy Polling.

In January, Dayton's approval rating was 53 percent. Now it's 49 percent, with 47 percent of of those polled saying they disapprove of the job he's doing. That's largely because independent voters say they've lost confidence in Dayton. His support remains strong among Democrats.

When Dayton's polled against possible Republican contenders in 2014, he has a strong lead.

- Against House Minority Leader Kurt Daudt, Dayton leads by 12 percentage points.

- Against former GOP gubernatorial candidate Tom Emmer, Dayton leads by 13 percentage points.

- Against Senate Minority Leader David Hann, Dayton leads by 15 percentage points.

- Against Sen. Dave Thompson, R-Lakeville, Dayton leads by 16 percentage points.

- Against Sen. Julie Rosen, R-Fairmont, Dayton leads by 17 percentage points.

- Against Rep. Kurt Zellers, R-Maple Grove, Dayton leads by 18 percentage points.

- And against Scott Honour and Jeff Johnson, two Republicans who have formally launched 2014 campaigns, Dayton leads by 18 percentage points.

The news isn't as good for the DFL majority in the Legislature. It's approval rating is 36 percent. Republican legislators have a 23 percent approval rating. The DFL leads in a generic legislative ballot by a 6 percentage point margin.

PPP test other questions about legalizing same-sex marriage, minimum wage and the Vikings stadium. Read more about the poll here.

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House bonding chair looks ahead after final night protest

Posted at 11:30 AM on May 23, 2013 by Tim Pugmire (0 Comments)
Filed under: MN Legislature

The Minnesota House passed a pared-down bonding bill in the closing hours of the 2013 session, but the chair of the Capital Investment Committee removed her name as an author and refused to vote in protest.

Rep. Alice Hausman, DFL-St. Paul, said she strongly objected to the $156 million package of public construction projects that passed, 121-10.

"There's no way I could author what we did that last night," Hausman said. "To me, that was just flat out irresponsible."

Hausman had worked for months crafting a comprehensive $800 million bonding bill that failed to reach the 60 percent super majority needed for passage when it was put to a vote last Friday. Only three Republicans joined Democrats in voting for the bill, when at least eight GOP votes were needed.

The smaller bonding bill included $109 million for the next phase of renovation work on the deteriorating State Capitol building. But there was also money for flood mitigation projects and improvements to the Minneapolis Veterans Home. Hausman said she could have supported the Capitol project alone. But she didn't like the addition of other projects in order to gain Republican votes.

"The thing that has always troubled me is those who want to vote just for their stuff and not for everyone else's," she said. "Even though they voted no for everything else, we still came back to help them."

Hausman said she was particularly disappointed that no higher education or housing projects made it into the bill. Next session's bonding bill, she predicted, will now easily top $1 billion to accomodate the growing backlog of projects. But Hausman is already wondering about the prospects for such a bill.

"If they wouldn't vote for an $800 million bill, which was too big, who of the Republicans will vote for a bill well over $1 billion?"

Still, Hausman stressed that it is not in her nature to give up. She said she'll turn to community organizations throughout the state in the coming months to help educate lawmakers about the importance of specific public infrastructure projects.

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Top Republican says six MN U.S. House seats could be in play in 2014

Posted at 5:13 AM on May 23, 2013 by Brett Neely (2 Comments)
Filed under: Michele Bachmann

WASHINGTON - Six of Minnesota's eight U.S. house seats are among the dwindling number of potentially competitive seats in the 2014 midterm elections, according to Oregon U.S. Rep. Greg Walden, who heads the House Republicans' campaign organization.

"This is a much smaller battlefield than we've seen in the past," said Walden at a briefing for reporters on Wednesday afternoon.

This isn't to say that 75 percent of Minnesota's House seats will face competitive races next year. Walden's assessment is more a reflection that Minnesota has become a rare state where four districts (the 1st, the 2nd, the 3rd and the 8th) have a fairly even split between Democratic and Republican voters.

7th District Democrat Collin Peterson is a top target of the National Republican Congressional Committee (as he has been in many past election cycles). Peterson's district has voted for the past three Republican presidential nominees while returning the veteran DFL lawmaker to Washington which has earned Peterson a place in the NRCC's "Red Zone" of Democrats in Republican-friendly territory.

Two other Democrats -- 1st District Rep. Tim Walz and 8th District Rep. Rick Nolan -- were on Republicans' list of potentially vulnerable incumbents if the political winds shift or the GOP recruits the right candidate.

Walden also acknowledged that all three Minnesota House Republicans could be on defense in 2014. Democrats have specifically targeted 6th District Rep. Michele Bachmann and 2nd District Rep. John Kline. Both lawmakers are already facing a rematch against their 2012 competitors, Jim Graves and Mike Obermueller respectively.

Last week, Bachmann began running ads in the Twin Cities media market 18 months before the election, a highly unusual move in congressional races. It's likely a sign that Bachmann is trying to stave off another close race against Graves though Walden was confident of her prospects.

"Michele clearly has a national following that's very strong. She has a large cash on hand number and she is a very effective campaigner," Walden said of Bachmann.

3rd District Rep. Erik Paulsen has not been targeted but his district, like Kline's, narrowly voted for President Obama over GOP presidential nominee Mitt Romney last year, a sign of a competitive district.

Republicans currently hold 233 seats while Democrats hold 201 (one seat is vacant). Due to redistricting and demographic trends, political prognosticators such as the Rothenberg Political Report see Republicans holding a structural advantage of 209 safe seats in the House (217 are needed for a majority).

(2 Comments)

Franken and Klobuchar release details on personal finances

Posted at 3:00 PM on May 22, 2013 by Brett Neely (3 Comments)
Filed under: U.S. Senate

WASHINGTON - It's that time of the year when members of the Senate have to reveal details about their 2012 personal finances. Minnesota's two Democratic Senators, Amy Klobuchar and Al Franken, filed their disclosures on time and the official filings are available here for those who wish to dive deeper into them.

It's difficult to be precise about what members of Congress are worth because their assets and debts are reported in broad ranges, but from the 30,000 foot perspective allowed by the Senate filings, Franken and Klobuchar's personal finances are little changed from last year.

The Senate is sometimes referred to as a club for millionaires and Franken's net worth certainly qualifies him for membership while Klobuchar would only count for membership based on the highest estimates of her net worth.

Franken's assets are worth somewhere between $4.3 million and $12.8 million, essentially unchanged from his 2012 filing. Those assets are spread over a very broad set of investment funds and a personal business that manages the assets and income from Franken's previous career as a comedian, actor and writer before entering the Senate in 2009. Franken has a mortgage on his house in Minnesota that's between $100,000 and $250,000.

Franken reported outside income between $144,500 and $387,500, higher than the $103,000 and $290,000 he reported last year. While much of that money came in the form of interest and dividends, Franken also collected between $50,000 and $100,000 in rent from a co-op apartment he owns in New York City.

Klobuchar assets are worth between $400,000 and $1.2 million, an increase from last year when she reported assets between $310,000 and $1 million. Those assets are almost entirely spread across a series of investment and college funds. She reports holding no debts and minimal outside income from those investments.

For comparison's sake, the last place member of Congress on Roll Call's 2012 list of the 50 wealthiest members of Congress had a minimum net worth of $6.2 million although at least seven members of that list have retired or been defeated since it was published.

Disclosures by members of U.S. House will be released in the middle of next month.

(3 Comments)

Dayton signs education funding bill

Posted at 12:56 PM on May 22, 2013 by Tim Pugmire (0 Comments)
Filed under: MN Legislature, Mark Dayton

Gov. Mark Dayton says the education funding bill he signed into law today is one of the primary reasons for raising taxes this session.

The bill provides $485 million in new spending for public schools, including early childhood education scholarships, all-day kindergarten and a bump in the basic per-pupil formula. Dayton said while more money for education doesn't guarantee success, less money would guarantee failure.

"This is why we raised taxes progressively," Dayton said. "So that we could deal with the deficit, pay that off without having to make more draconian cuts, such as these programs here that would have been inevitably affected by that, and have the resources to make these new investments that are going to pay off for Minnesotans, for middle income families and for people throughout the state."

Sen. Chuck Wiger, DFL-Maplewood, said the bill he worked on as chair of the Senate Education Committee helps to turn the financing tide of the past decade by making needed investments in schools.

"This is the best education bill to be signed in Minnesota history," Wiger said.

Many Republican lawmakers opposed the E-12 bill.

Rep. Kelby Woodard, R-Belle Plaine, described the bill as empty slogans and promises. He said Democrats are increasing funding, but doing little to improve the current education system.

"We're just taking more money and putting it into the programs that have given us the same results over the last decade," Woodard said.

Woodard and other Republicans are also critical of the bill's repeal of the current tests required for high school graduation. Gov. Dayton said those tests are "onerous" and "absurd," and will be replaced with a better system for measuring student performance.

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Poll shows Franken with big leads over potential opponents

Posted at 1:55 PM on May 21, 2013 by Brett Neely (0 Comments)
Filed under: U.S. Senate, U.S. Senate Race

WASHINGTON - U.S. Sen. Al Franken is in "good shape for re-election" 18 months out from Election Day 2014 with approval ratings above 50 percent and a big leads over all of his potential opponents, according to the Democratic polling firm, Public Policy Polling.

In a survey of 712 Minnesota voters from May 17-19, the firm found that Franken drew more than 50 percent support against all of his potential GOP rivals. The poll's margin of error is 3.7 percent.

Franken won office in 2008 with a slim 312 vote margin and Republicans have long argued that he will be vulnerable in 2014. Still, the GOP has struggled to recruit a high profile candidate to run against Franken.

So far, no Republicans have officially declared their candidacy though businessman Mike McFadden appears closest to launching a campaign. The GOP's highest-profile potential recruits, U.S. Reps. John Kline and Erik Paulsen, have both declined a Senate bid.

"Al Franken has proven to be a pretty popular Senator," said Dean Debnam, the firm's CEO. "Add to that a relatively weak Republican bench in Minnesota and he's looking like a clear favorite for re-election."

PPP works for Democratic candidates (in fact, the firm polled Minnesota's 6th District on behalf of DFLer Jim Graves and his bid against Bachmann earlier this week) but generally has a reputation for accuracy.

The firm polled Franken against McFadden, U.S. Rep. Michele Bachmann, talk radio host Jason Lewis, state Sen. Julianne Ortman, state Sen. Julie Rosen and Hennepin County Sheriff Rich Stanek. With the exception of Bachmann, most of those potential candidates had limited name recognition with the public.

Two potential candidates who pulled their names from consideration early were former Gov. Tim Pawlenty and former U.S. Sen. Norm Coleman (who was defeated by Franken). PPP's poll suggests why neither ran: both were viewed favorably by less than 40 percent of those polled.

Minnesota is not the only state where the GOP is struggling to recruit strong candidates. The AP recently reported that Republicans in Iowa and Michigan were having similar problems in the face of open seats currently occupied by Democrats.

Franken's fellow U.S. Senator from Minnesota, DFLer Amy Klobuchar, continues to have a very high job approval rating of 61 percent. Klobuchar was re-elected by a landslide last year.

PPP says it will also release polling results about Gov. Mark Dayton tomorrow.

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Dayton hails results of session

Posted at 12:05 PM on May 21, 2013 by Mike Mulcahy (1 Comments)
Filed under: MN Legislature, Mark Dayton

Dayton-May-21.jpg
Gov. Mark Dayton talked about the legislative session with reporters today as Sen. Katie Sieben, DFL-Newport, looked on. Photo: Tim Nelson

From MPR's Tim Nelson:

Gov. Mark Dayton says the just-concluded legislative session was a landmark.

This morning he touted results including statewide all-day kindergarten and financial support for Rochester to help with the Mayo Clinic's Destination Medical Center plan.

"When people asked me last fall what would happen when we had a DFL legislature and a DFL governor, I said one word: progress," Dayton said. "And that's what we've brought about in the last five months."

Dayton and DFL leaders said legislation passed this year will also give Minnesotans property tax relief, a fairer income tax system with higher taxes on top-tier earners, a two-year tuition freeze for University of Minnesota and MNSCU students and tax incentives to create private sector jobs.

Republicans decried the results, much of which happened without any GOP support.

"We started with a $627 million budget problem and Democrats solved it by raising sales, income and business taxes that everyone will pay," said Senate minority leader David Hann, R-Eden Prairie, ahead of a statewide barnstorming tour.

"Unfortunately, everyone will pay more because of the Democrats' overreaching."

Republicans were particularly critical of the Legislature's passage of a bill authorizing day care workers and personal care assistants to vote to join a union. Republicans called it "political payback" to unions looking to expand their reach in the state's workforce.

Legislative leaders said they didn't overplay their political hand, but corrected a long-standing imbalance, marked by chronic budget crises for the state.

"I think this is a Legislative session where we really turned the corner," said House Speaker Paul Thissen. "We did finally get past the partisan gridlock and balance our budget without gimmicks in a fair and lasting way. And that is going to be a lasting legacy."

Dayton was also critical of Republicans for not agreeing to a proposed $800 million state borrowing bill. Lawmakers could only agree to a pared-down version that funds Capitol restoration work, improvements to the Minneapolis Veterans home and flood protection in northwest Minnesota.

Dayton said the state should have done more.

"The Republicans wouldn't pass a bonding bill that had all these economic development projects, the Mayos of these small towns; Fosston and St. Cloud, Mankato. Not so small. But those were the equivalent projects. And they just turned them all down," he said. "They don't believe there's any role for government in positive economic development, and they're wrong."

The state's Independence Party was also critical of the results of the legislative session.

"The 2014-2015 budget still does not address that the debt that this state incurred to our schools in 2012-2013. Republicans and Democrats are both complicit in it. They both passed imbalanced budgets," said party chair Mark Jenkins.

He called on state leaders to pay back the so-called school shift by Dec. 1, or the party would file a lawsuit to ask the court to balance the state budget.

The Dayton administration isn't worried about the potential suit.

"The budget is absolutely balanced, it's absolutely constitutional," said state budget director Jim Schowalter. "Simple timing of payments has been found under the purview of the Legislature and the governor for years."

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About the Contributors

  • Mike Mulcahy is MPR's political editor. He has covered politics and government in Minnesota for nearly 20 years. He also produces the Policast podcast.
  • Tim Nelson has covered the Vikings stadium and other issues at the Legislature since 2011. He’s been at Minnesota Public Radio since 2008, and was a 16-year-veteran of the Pioneer Press. He covered the Twins stadium hunt and St. Paul City Hall there for seven years.
  • Tim Pugmire covers politics and state government for Minnesota Public Radio News from the state capitol bureau. He previously reported on education and also spent time at MPR's Collegeville bureau.
  • Tom Scheck covers politics and state government for Minnesota Public Radio News. He moved to Minnesota in 2000. Scheck went to Syracuse University and grew up in Bethlehem, Penn. He now lives in Falcon Heights with his wife, son, and dog.
  • Catharine Richert Catharine Richert writes PoliGraph. She's previously reported for PolitiFact.com and Congressional Quarterly, and has a Masters in Public Policy from the Hubert H. Humphrey School of Public Affairs.

About Poligraph

The feature examines statements made by Minnesota politicians and checks them for accuracy. Based on data analysis, document reviews and interviews with non-partisan analysts, statements are rated true, misleading, false or inconclusive. More

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