Lawmakers wrap up session: Taxes up on cigarettes, top earners; wage hike fizzles

Published 6:07 am Tuesday, May 21, 2013

The gavel fell after a frenetic final push to wrap up major issues.

A lock on power by Democrats guaranteed they would get most of their wish list. In a $38.3 billion budget, lawmakers raised taxes on top earners, eliminated some corporate tax write-offs and increased the cigarette tax. That erased a $627 million deficit but also brings in enough money to boost funding for schools and dole out property tax relief.

Lawmakers also made Minnesota the 12th state to legalize gay marriage. But efforts to tighten gun restrictions in the wake of the Newtown shootings failed. An increase in the minimum wage fizzled when the two chambers couldn’t agree on how much to raise it. That falls to the 2014 agenda.

The session began — and ended — with Democrats sensitive to worries they would overreach with their agenda after controlling all aspects of government for the first time since 1990.

“We set an ambitious agenda but I think it’s one that Minnesotans actually want to see. It is a great agenda for middle class Minnesotans, for investing in education,” said House Speaker Paul Thissen, DFL-Minneapolis. “It looks like overreaching maybe because the last 10 years have been underperforming.”

House Minority Leader Kurt Daudt, R-Crown, said his party would make the case to voters that the new taxes will cripple the economy and that labor unions were given too much power to sway state policy.

“They didn’t restrain themselves, and ultimately they will probably be judged poorly on that,” Daudt said of his Democratic counterparts.

Just minutes before midnight, the tax bill passed the Senate 36-30, with three Democrats voting against. The vote was also tight in the House earlier in the day.

It’s the first state-level tax increase approved by lawmakers since the gas tax went up five years ago. Some 54,400 taxpayers would pay a higher income tax, averaging $7,200 more per year, according to legislative researchers. The new 9.85 percent upper income tax level is 2 points higher than the current top tier. Gov. Mark Dayton’s administration pointed out that the average household income that would be subjected to the new tax was $617,000.

The tax on a pack of cigarettes goes up $1.60. Corporations lose some tax preferences. And some businesses see more transactions subjected to the sales tax, including a tax on warehousing that some farm groups are pledging to try to repeal before it takes effect in April 2014.

Minority Republicans said the entirety of the tax increases would hurt businesses and residents.

“This tax bill will make us a high-tax island. Members, that’s a fact,” said Sen. Julianne Ortman, R-Chanhassen.

Sen. Rod Skoe, a Clearbrook Democrat who helped craft the plan, disputed the gloomy assessment.

“Taxes are important, but it’s not the most important thing,” he said.

The bill contains $570 million in new credits and local government exemptions that backers frame as property tax relief. Some money flows into aid programs that give breaks directly to homeowners. Dayton plans to sign it and the entire budget within the next two weeks.

Republicans also howled about a bill that could lead to unionization of home-based day cares and home health care workers, labeling it political payback for labor interests that are a key Democratic constituency.

It passed the House with no votes to spare after many hours of debate. A group of union supporters in the gallery broke into loud cheers and hooting. That prompted angry shouts from House Republicans, including Rep. Pat Garofalo of Farmington, who shouted: “Let ’em applaud, they own the place!”

The room finally quieted after Thissen pounded his gavel several times.

Even within one-party rule, the traditional session logjam played out. And that scuttled two early session priorities of Democrats — the minimum wage increase and a bill to stiffen school bullying policies. Republicans claimed victory in deferring final decisions on those, but even they acknowledged the measures will resurface soon enough.

Senate Majority Leader Tom Bakk said the minimum wage discussion will go on in the interim in hopes of getting a deal that both business and labor interests can support. For now, the state’s minimum wage stands at $6.15, one of the lowest in the country.

The most compelling battle of the session was fought over gay marriage. After beating back an amendment in November that would have banned it, same-sex marriage supporters transformed their network into a push to legalize it. They ultimately did so in votes that proved surprisingly easy. Gov. Mark Dayton signed the legislation last week in a ceremony on the Capitol’s south lawn attended by thousands.

High-level negotiations resulted in a small construction borrowing package built around a $109 million installment for the state Capitol renovation, money needed to keep the work going.

“This building has no lobbyist to shill for it,” said Rep. Dean Urdahl, R-Grove City, before a 121-10 House vote. “It has us and we must not let it down.”

Lawmakers passed smaller but still important policy bills as time ticked down. Minnesota will join many other states in allowing people to vote absentee without having to declare a reason. And a campaign finance bill raises the size of contributions that Minnesota candidates can accept from individuals.

A 43-26 vote early Monday sent a proposed constitutional amendment to the 2016 ballot that asks voters if an independent council should set legislator pay; that decision now rests with lawmakers, who haven’t touched salaries since 1999 for fear of a political backlash.

Lawmakers don’t convene their election-year session until February.