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State proposes tax hikes

On the one hand, most Lake County residents will likely escape a proposed 2 percent state income tax hike on couples making $250,000 or more. But on the other hand, nearly everyone could feel the smaller pinch of a business-to-business sales tax likely to be passed on to consumers.

Those are some of the observations of area residents as Minnesota State House leaders get closer to their plan to raise taxes by $2 billion over the next two years.

"I think we're taxed enough," said Al Peterson, owner of Auto Value in Two Harbors. Peterson said "quite a bit" of his business is wholesale to car repair shops, meaning his customers -- and their customers -- could be affected by a proposed business-to-business sales tax.

"It'll hurt the consumer because (the increased cost) will be passed on to the end user," Peterson said, citing as an example a mechanic purchasing a starter for a car and paying the tax on the part, then charging the customer to cover it.

Peterson suggested a better solution would be for the state to stop spending. But others expressed receptivity to increasing taxes on higher-income people.

"As far as taxing people at the top end, I think they should do that, so they're paying their fair share. I know there are a lot of loopholes," said Roger Fjeran of Two Harbors, adding that the proposed additional taxes seemed "like the state is getting pretty desperate. Everybody's getting desperate," he said thoughtfully.

Gov. Mark Dayton and legislative leaders announced Monday afternoon, eight days before lawmakers must adjourn for the year, that they have an outline for how to spend $38 billion in the next two years and how to raise money they need.

Dayton, Speaker of the House Paul Thissen (DFL-Minneapolis) and Senate Majority Leader Tom Bakk of Cook, said that they have agreed on a list of spending targets that will inform discussions in conference committees. In addition to the business to business tax and the boot in income tax for higher-level wage earners, the proposed topics for consideration look like this:

· An income tax surcharge would be added for Minnesota's richest of the rich, with proceeds going to help repay money the state has borrowed from school districts.

· Cigarette taxes would rise.

· Some business tax breaks would disappear.

· All-day kindergarten would be funded.

· The state would spend $400 million in property tax relief, such as by increasing aid sent to local governments.

Bakk, who represents Lake County, said the budget outline will make sure two Minnesota priorities are met: more money for education and property tax relief.

The three Democrats said middle income Minnesotans would not pay more taxes other than for cigarettes. But when reporters pushed him on the subject, Dayton said that some of the business taxes could trickle down to consumers in higher prices.

With Democrats controlling the House, Senate and governor's office, three people are in charge of making most decisions about what will be presented to 201 lawmakers. Republicans have not been involved in budget talks.

"It's too early to call a victory lap," Thissen said, because most of the details are being left to House-Senate budget and tax conference committees to negotiate final details.