Horner budget would expand sales tax, cut spending, make schools keep waiting for delayed cash

Horner outlines budget plan: Taxes, cuts, delays

ST. PAUL, Minn. — Shoppers would pay new sales taxes on clothing. Drinkers and smokers would plunk down more money, too. And school districts would see longer waits for promised state aid, while other state programs would face fresh cuts.

Independence Party gubernatorial candidate Tom Horner outlined a budget plan Monday that will annoy almost everyone. That’s what he said it will take to dig Minnesota out of a shortfall approaching $6 billion, and he challenged his rivals, Democrat Mark Dayton and Republican Tom Emmer, to put forward similarly detailed plans so voters can compare.

“No one will be able to govern Minnesota if we have a campaign that says, ‘Don’t worry, nobody’s going to have to take any hits.’ That’s not true. That simply isn’t the case,” Horner said.

Dayton wants to raise taxes on the highest-income Minnesotans, while Emmer aims to put state spending on a crash diet, the details of which remain vague.

Both campaigns said Horner’s plan would focus new taxes on middle-class and low-income taxpayers. GOP Chairman Tony Sutton likened it to a “buzz cut” because the sales tax expansion would include services like haircuts and personal trainers, but not lawyers. Emmer campaign manager Cullen Sheehan said it was “status quo.”

Dayton said the proposal would give “Minnesota’s millionaires and multi-millionaires” a pass.

Horner’s plan would raise $2.2 billion in new taxes in his first two-year budget, netting $1.4 billion by expanding the sales tax while lowering Minnesota’s 6.875 sales tax rate by a percentage point. Most consumers wouldn’t feel the full reduction, though, because he would also allow counties to impose 0.5 percent sales taxes at the local level. His plan also includes a sales tax credit for low-income taxpayers to make the increase less regressive.

Food, health care and prescription drugs would remain exempt from the sales tax.

The former public relations executive would also bring in $600 million by raising alcohol taxes a dime a drink and cigarette taxes $1.50 a pack. He aims to eliminate the corporate tax in steps beginning in 2013.

Horner’s plan also includes a state-authorized racetrack casino, or racino, to raise $125 million a year to help build a new Vikings stadium, replenish the state’s rainy day fund and set aside emergency aid for disasters. He also envisions some new spending — $360 million for education programs, $145 million for education and health care innovation programs and $140 million to buy into a Medicaid expansion under the federal health care overhaul.

State spending would be cut more than $1.3 billion, with tax credits for ethanol plants and the JOBZ rural economic development program gradually phased out, under Horner’s plan. Horner said streamlining government services would save the state another $1.1 billion, and he plans an overhaul of the way counties provide services with state funding.

School districts also would continue waiting for the state to repay $1.8 billion in delayed aid checks until at least 2012, his plan said.

Horner, a former Republican, contends that he is best positioned to mend the budget and improve Minnesota’s economy because of his status as an outsider to the two parties that currently control state government.