Rep. Jeanne Poppe, DFL-Austin, acknowledges broadening the state’s sales tax could be a contentious issue.

“I think people are concerned,” she said. “How is that going to impact us? How is that going to impact our customers?”

Despite those hesitations, Poppe said the widening sales tax Gov. Mark Dayton suggested during his State of the State speech Wednesday evening could stabilize the state’s tax system and is worth discussing. Dayton tacked to the left on other issues during the speech, arguing that past state and federal income tax cuts were bad for the economy, and issued his most ringing endorsement yet of legalizing same-sex marriage in Minnesota as a debate over that issue looms at the Capitol.

The Democratic governor’s budget proposal also includes income tax hikes on the wealthy. He criticized what he said were too many years of political stalemate in St. Paul, and rebuked Republicans for insisting on balancing the state budget without raising new revenue.

“Are we better off today after all those reductions in public services? I say no,” Dayton said, to applause from legislative Democrats. “Trying to cut our way to a better Minnesota is a failed experiment, and we should not repeat it.”

Poppe agreed income tax cuts had caused issues before, and pointed to education as one area that has been hurt.

“You don’t have to look very far to see that we have damaged many things that we were well known for,” she said. “Higher education has become so costly … We haven’t actually invested in the schools and our kids.”

Sen. Dan Sparks, DFL-Austin, did not return calls for comment.

Dayton’s budget proposal has had a rocky early reception from state business leaders and even some fellow Democrats. Its success or failure in the coming months is likely to set the tone for the rest of Dayton’s term, as he looks to a 2014 re-election bid.

Dayton’s speech, which ran just short of 45 minutes and which he wrote himself, revisited both state and federal political decisions of the last decade-plus that the governor argued contributed to years of unstable state budgets. He singled out state income tax cuts approved by former Gov. Jesse Ventura and state lawmakers in 1999 and 2000.

“In the decade after Minnesota’s income tax reductions, our economy fared worse than the nation and most other states,” Dayton said.

If enacted, Dayton’s tax and spending proposals would eliminate the latest, $1.1 billion deficit, make investments in programs that Dayton said would contribute to the state’s cherished quality of life and leave a surplus by 2015.

“The majority of people realize that we need to bring more money into the system,” Poppe said, adding higher income taxes are a way to add fairness to the system. “You have to be able to sustain the economy in good times and in bad.”

Republican legislative leaders suggested Minnesota’s economy is already on the mend — in their view, because of Republican legislative control in 2011 and 2012 — and said Dayton’s tax policies would make the state a worse place to do business.

“We need to have a tax policy that promotes job creation and economic growth,” said House Minority Leader Kurt Daudt, R-Crown.

Dayton preemptively addressed such criticism in his speech, ribbing Wisconsin’s economy for underperforming Minnesota’s after frequent suggestions that his proposals would drive companies across the border.

In addition to touting his budget proposal, Dayton argued that neither the state nor federal government are doing enough to reverse climate change — predicting that inaction would lead down “a path to global catastrophe.” He asked lawmakers to work with clean energy advocates, large energy providers and users, and his administration to put forward programs promoting sustainable energy.

Dayton also suggested a change in how the Legislature operates, saying sessions in even-numbered years should be an “unsession” mainly devoted to eliminating unnecessary laws, rules and regulations. He said he would direct state agency heads and legislative staff to start preparing lists of laws and regulations that could come off the books.

Poppe said she thought the idea had real merit, especially considering there are legislators who introduce a high number of bills or bills that are very unlikely to pass. She said she approves of the idea to reduce mandates and policies that have become outdated.

“I’ve always thought that we need to show some restraint when we’re in the legislative session,” she said.

While most of Dayton’s speech focused on the budget, his brief mention of support for same-sex marriage marked a step forward for that issue’s prospects at the Capitol. Dayton has previously supported same-sex marriage but had been reluctant to endorse a planned legislative push on the issue in 2013.

Dayton stopped short of definitively demanding a gay marriage bill on his desk this year. But after the speech, Senate Majority Leader Tom Bakk — who also had been tentative about a gay marriage push in the Legislature this year — said a bill could start moving at the Capitol in April, after lawmakers finish the budget. Bakk also said he would vote to legalize gay marriage if it gets to the Senate floor.

Poppe said the issue falls short of the Legislature’s focus right now.

“Our focus has to be on the budget and how we’re going to stabilize that,” Poppe said. “Right now, that has got to be the priority.”

GOP leaders said discussions of gay marriage should take a back seat to budget deliberations. Dayton, while acknowledging the issue is contentious, said he believes “every Minnesotan should have the freedom to marry legally the person he or she loves, whether of the same or other sex.”

—The Associated Press contributed to this report.