Updated: 01/23/2013 6:32 PM KSTP.com By: Leslie Dyste
State Rep. Ben Lien is a freshman Democrat from Moorhead, where clothing merchants enjoy an advantage over competitors in Fargo just across the river because Minnesota doesn't have a sales tax on apparel.
Lien is among the lawmakers who could determine the success or failure of Gov. Mark Dayton's ambitious tax reform proposal, which includes eliminating the sales tax exemption on clothing purchases over $100.
"People come over to Moorhead to buy clothes," Lien said Wednesday. "So that was a concern that I had before the budget was even released."
Dayton's recently unveiled budget blueprint proposes $2.1 billion in new taxes, mainly by lowering the overall sales tax rate but applying it to more things, hiking income taxes on the state's wealthiest citizens, and raising the state's cigarette tax by 94 cents to $2.54 a pack. In exchange for the new tax revenue, the Democratic governor's $38 billion plan increases spending to public schools, colleges and job-creation programs and provides a $500 yearly property tax rebate to all Minnesota homeowners.
With Democrats now running the state House and Senate, Dayton has a receptive audience. But that doesn't mean getting their votes will be easy. DFL lawmakers, particularly freshman members from swing districts, could face trouble convincing constituents that they'll see the benefit of paying more sales taxes for clothes, services like hiring lawyers and accountants, or going to the hair salon or car mechanic. The governor is hoping to sweeten the pot by reducing the overall rate from 6.875 percent to 5.5 percent.
"That is going to be the most controversial piece, I don't think there's any question about that," said Rep. Tim Faust, DFL-Cloverdale, who rejoined the Legislature this year after losing a reelection bid in 2010. "It's hard to judge whether my district would pay more or less sales taxes as a result of that. The jury is still out on that one - I'm not as excited for that one as some of the other things."
After unveiling his budget proposal Tuesday, Dayton met privately later in the day with DFL lawmakers. His spokesman, Bob Hume, said most of the questions were about the sales tax changes. On Wednesday, the governor began the job of pitching his changes beyond the Capitol's walls; he said in a conference call with journalists from greater Minnesota news outlets that in the 24 hours since unveiling his plan, he learned that "everyone is for change as long as it doesn't happen to them."
Dayton said he wants to go before local chambers of commerce and Rotary Clubs to promote his plan. He'll also meet one-on-one with lawmakers in the coming months; legislative leaders say they're likely to roll out House and Senate budget proposals by April and have promised it's likely to vary in noticeable ways from what Dayton proposed.
Democratic lawmakers were reluctant to commit themselves either way on Dayton's tax proposals, and most say that the new money would help pay for promises they made on the campaign trail - from all-day kindergarten to lowering property taxes to slowing the increasing cost of college tuition.
Lien, elected to a House seat long held by Republicans, said despite his concern about the effect of a clothing tax on the Moorhead economy that he liked Dayton's spending priorities and his effort to stabilize the state budget in order to end chronic deficits and temporary fixes.
"I think the most important thing to take away from this is that it's sound, responsible budgeting," Lien said. "In terms of specifics, it gives us a starting point for discussions."
Some of Dayton's proposed tax changes will be an easier sell than others: his longtime call to tax income at a higher rate of 9.85 percent above $150,000 for single filers and $250,000 for joint filers is popular with fellow Democrats, and many new lawmakers are from exurban or rural areas with few residents who earn that much.
"I think that's something like 40 people in my district," said Faust, who represents towns including Mora, Pine City, Sandstone and Hinckley. He said he hopes to see an analysis of whether residents of his district would end up on average paying more or less under the proposed sales tax changes.
Legislative Republicans lack the votes to stop Democrats from raising taxes, but they will be quick to use those votes as clubs in 2014, when Dayton and all House members are on the ballot.
"This is a massive tax increase on all Minnesotans," said Rep. Greg Davids, R-Preston, a veteran House Republican. "We'll be talking about this for the next two years. This is an albatross around the neck of every Democrat running for office in 2014."
Just as Dayton has to win over Democratic lawmakers, those lawmakers must win over constituents. Just a few hours after getting his first look at Dayton's proposal, freshman Rep. Dan Schoen - a Democrat from a swing area in suburbs south of St. Paul - found himself trying to explain the sales tax changes to several constituents at a restaurant.
"When you actually explain how it works, there's a lot more support for it than I thought there would be," Schoen said. "These were folks I generally know to be Republicans, and quite frankly they wouldn't vote for Mark Dayton. But when I explained some of these things, they said, 'OK, maybe that's not so bad.'"
Associated Press reporter Brian Bakst contributed to this report.
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