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May 11, 2007 5:41 pm US/Central
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Income Tax Hike Bill Headed Governor's Way
St. Paul (AP) ―
For the first time in his four-plus years in charge, Gov. Tim Pawlenty will get to act on a bill raising the state income tax. Next week, lawmakers plan to add a gas tax hike to his inbox.
Pawlenty long ago took the mystery out of it, promising -- almost relishing the chance -- to veto both.
As the 2007 legislative session rolls toward a mandatory May 21 adjournment, state leaders are still searching for an exit strategy. Rank-and-file legislators, especially the rookies, desperately want to avoid a protracted stalemate like those that pushed past sessions into overtime.
"I don't think it looks good for any of us and it's certainly not what the people of Minnesota expect, to stretch this out," said Rep. Julie Bunn, DFL-Lake Elmo. "I came here very much to foster greater cooperation."
On Friday, Bunn joined seven first-term DFLers -- and 11 Democrats overall -- in opposing the bill creating a new income tax rate for top earners to provide property tax breaks for homeowners. She found herself on the same page as Republicans who have argued the state has enough money to fulfill its obligations without raising more.
Voters sent bulky Democratic majorities to St. Paul this year opposite a hold-the-line Republican governor. Heading into the session, all sides spoke of replacing a caustic climate with common cause.
But that goal is being put to the test.
Friday's move to send Pawlenty the income tax plan directly challenges his refusal to consider new taxes. Meanwhile, Assistant Senate Majority Leader Tarryl Clark cast the transportation bill containing a nickel gas tax as a take-it-or-leave-it proposal.
Clark, DFL-St. Cloud, said the governor should consider letting the multibillion dollar transportation bill become law without his signature. Failing that, she urged his fellow Republicans to join DFLers in overriding the promised veto.
"It's not the time to sit on the sidelines. This is THE bill," she said. "This is the package for this year."
If the bill stumbles, she said lawmakers will counter with a bare-bones package that merely keeps the transportation agency afloat without pushing ahead on a backlog of big projects.
In a sign of the high-stakes votes ahead, the conservative Taxpayers League of Minnesota began sending action alerts urging citizens to contact Republicans lawmakers who might consider joining the override effort.
"Tell them you're taxed enough and tell them to stick with the Governor and the rest of their House Republicans," the e-mail alert reads.
Pawlenty's vetoes on budget bills -- five and counting -- seem safe if the legislative vote tallies are any clue. So would his action on the tax bill, judging by the 73-58 House vote. An override requires 90 votes in the House, 45 in the Senate.
The tax bill would create a new 9 percent income tax rate on top earners, generating about $452 million in the next two years. The new fourth tier of the income tax would apply to taxable income above $400,000 for married couples and $226,000 for single filers.
The state would use the money to take over some school levies and homeowners could also see refund checks depending on the amount of property taxes they pay in relation to their income.
A fresh Minnesota Public Radio News poll that found 72 percent of likely voters favor taxing wealthy incomes at a higher rate to lower property taxes. The poll of 625 likely voters, which also found Pawlenty with a 55 percent approval rating, was taken this week and has a margin of sampling error of plus or minus 4 percentage points.
Despite the expected veto, Democrats said they wanted to send a message to Pawlenty and Minnesotans that property tax relief is a top priority. They said nine in 10 homeowners would benefit while only 1 percent of taxpayers would see their income taxes rise.
"This is a good bill, and 99.9 percent of you on the other side know it is," said Rep. Tom Rukavina, DFL-Virginia. "Why don't you have the intestinal fortitude today to stand up to your governor and say `Governor, do what's right."'
Republican legislators argued that Democrats were offering false hope to homeowners by passing a plan that won't become law.
"If it is truly a priority of this Legislature then let's find a way to do it within the $2.2 billion surplus," said Rep. Paul Kohls, R-Victoria. "You don't need to raise taxes on one group of people to provide tax relief."
Legislative Democrats haven't said publicly how much money they need to satisfy spending desires for education, health care and property taxes.
House Taxes Committee Chairwoman Ann Lenczewski, DFL-Bloomington, said lawmakers could ultimately turn to revenue options besides the income tax. But all hinge on getting Pawlenty's endorsement, she said.
"He has to tell us what he thinks is acceptable," she said. "It's his job to tell us what he would support."
Altering the corporate tax code for businesses with overseas operations is one possibility. Another is a plan to more aggressively pursue tax evaders. Senate tax leaders have suggested drawing more money from the business property tax. There's also been speculation about increasing a 75-cent-per-pack cigarette surcharge put in place two years ago.
The cigarette charge helped end a partial government shutdown after budget negotiations spilled into July.
Publicly, Pawlenty and top GOP legislators have adopted a mantra that the current pot is big enough. But Republican Sen. Geoff Michel of Edina met with Pawlenty Thursday and came away sensing the governor is willing to deal.
"Governor Pawlenty gets it," Michel said. "He's going to have to give something. Democrats are going to have to give something."
(© 2007 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)