The House Ways and Means Committee held a hearing this morning on Gov. Dayton's budget plan.
The measure relies on an income tax hike on top earners, an expansion of the sales tax to business and consumer services and a cigarette tax to erase a $1.1 billion projected budget deficit and spend more money on education. Dayton's plan would also lower the overall sales tax rate and cut property taxes.
Management and Budget Commissioner Jim Schowalter told the House Ways and Means Committee that the governor had reservations about raising the cigarette tax but was convinced by public health officials that it would lower overall health care costs. That prompted Rep. Phyllis Kahn, DFL-Minneapolis, to suggest raising the tax on alcohol as well because it adds costs to the state's criminal justice system.
"I know we're talking about the fact that taxes on cigarettes and liquor are regressive taxes in terms of consumption profiles but I think the way they look at them is that they become an even more progressive effect on health issues if they end up changing the behavior at those levels," Kahn said.
Schowalter said considered a lot of tax ideas but focused on a tax plan that they believe would be fairest for all Minnesotans.
Republicans were quick to criticize the lack of spending cuts in Dayton's budget.
Rep. Dennis McNamara, R-Hastings, said he was concerned that a lot of the items Dayton identified as spending cuts in his budget plan aren't really cuts at all.
"I hope you will tell us how much is real, true reallocation and cuts and how much is a paper shuffle," McNamara said. "I hope the whole budget isn't just what I've seen in the DNR. I hope there is some real truth in it because that's extremely misleading."
Schowalter said the $225 million in spending cuts are a combination of reallocation of existing funds, cuts and money gained from a settlement with HMOs. Dayton is also proposing $2 billion in tax increases to erase a projected $1.1 billion deficit and spend more money on education and job creation.
Dayton's budget plan is expected to receive additional scrutiny tomorrow when the chairs of the Senate and House Taxes Committees hold their first hearings on the proposal.