June 10, 2005
Back to square one

I had a feeling this big DFL offer was being overhyped. It turned out to be less than promised, and the stalemate goes on at the Capitol. According to Gov. Pawlenty and the Republicans the DFL offer was less than half a loaf. They've accepted a 55 cent per pack cigarette tax but want the money dedicated to health care. And they're sticking by their plan to raise income taxes on the state's top earners. MPR's Laura McCallum has the story:

Senate Majority Leader Dean Johnson of Willmar says Democrats want first to resolve the issue of health care. "The health care bill is extremely important, that we get the MinnesotaCare issue resolved, and we know full well that people will then come together on education. We know that," he said.

Johnson says under the DFL proposal no Minnesotans would be cut from MinnesotaCare, the state's subsidized health insurance program for the working poor. Under Republican budget proposals, single adults with no children would be eliminated from the program.

To pay for state-subsidized health care, Johnson says Democrats are willing to accept a cigarette tax increase. The idea was first proposed by Gov. Pawlenty three weeks ago. Pawlenty proposed a 75-cent a pack "health impact fee." Proceeds would go to state health care programs and free up some money for education.

DFL leaders say they'll support a 55-cent increase, and they're still calling for higher income taxes on the wealthiest Minnesotans.

Gov. Pawlenty, who has repeatedly said he won't support an income tax hike, called the DFL offer "deeply disappointing."

"It is not a compromise to propose the highest taxes in the nation, and a grotesque tax increase to fund a health and human services budget that is already out of control and unsustainable," he said.

The Star Tribune story talks a little about strategy:

Republicans contend that the DFL strategy is intended to force a situation where more K-12 spending, which both parties want, is contingent on either the proposed income-tax increase or a closing of corporate "loopholes."

"It's nakedly obvious that they [DFLers] want to pit increased taxes against the needs of children," Pawlenty said. "That's irresponsible ...We weren't born yesterday."

But Johnson said his party's polling shows that their approach is popular with voters. "God and the stars are with us on this," he said.

"The governor has no high ground on taxes," Entenza said just before entering the talks with Pawlenty and the GOP leaders. By proposing the cigarette fee and $139 million of local property taxes, he said, "virtually every Minnesotan would be touched by the governor's tax increases."

Those corporate loopholes referenced above could become even more important in coming days. Patrick Condon of the Associated Press has this item:

The Minnesota Supreme Court has ruled in favor of a Hutchinson computer company that is trying to avoid paying taxes on income generated by foreign subsidiaries. In October, those taxes were estimated at $117 million, but State Finance Commissioner Peggy Ingison said she's not sure if that figure is still accurate. The Department of Revenue had tried to deny certain exemptions to Hutchinson Technology for taxes it paid from 1994 to 1999.

The court's ruling clears the way not only for Hutchinson Technology to collect on those exemptions, but is likely to have broader tax implications for Minnesota companies with foreign subsidiaries.

The issues in the ruling center on whether state-based companies with foreign subsidiaries can be allowed to take advantage of tax exemptions granted under federal tax law.

Stay tuned for more on what that decision could mean for the overall state budget. MPR's Michael Khoo did some excellent reporting last year on the foreign subsidiaries issue.

Given that it's Friday, one more check in on the Hatch daughters seems appropriate. This is from the AP:

Officer Jeffrey Phillips testified Thursday that a security guard flagged him down and said some women were causing a disturbance outside the club. He said Elizabeth Hatch refused his requests to leave the scene, yelled profanities and slapped him.

Phillips said he wrestled her to the ground, handcuffed one of her wrists and then hit her in the head with his open hand to distract her so he could put on the other cuff.

"There was just no time to calm the situation down and ask what the problem was," Phillips said.

Elizabeth Hatch also took the stand Thursday, saying a police officer attacked her after she was thrown out of the bar for complaining that a customer allegedly groped a waitress.

Prosecutors also have alleged that Anne Hatch kicked out a squad car window after police placed her in the back seat.

I guess we'll have to see if the verdict on this case comes in before the verdict in the Michael Jackson case. At least there's no jury in Chicago.

Posted by Mike Mulcahy at 6:45 AM