State budget deal close: Booze tax dropped

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DFL Gov. Mark Dayton and top Democratic lawmakers appear to have trashed a proposal to hike taxes on alcohol, as they seek to seal a state budget deal for the next two years, the Star Tribune reports.

Lawmakers huddled late Thursday night as they try to cobble together a tax plan as part of end-of-session budget negotiations, the newspaper reports.

The latest proposal would raise $2 billion in new revenue through a permanent income tax increase on high-salary earners and a dramatic hike on cigarettes, the Star Tribune reports. Married couples with an income of more than $250,000 would see a 2 percentage point income tax hike, to 9.85 percent, the Star Tribune reports. The tobacco tax would more than double, adding $1.60 a pack. That would increase the total tax to $2.83 per pack and raise an estimated $430 million over the next two years, the Pioneer Press reported.

As previously reported, consumers would not pay a sales taxes on clothing or services. Companies would face three new services taxes: on warehousing and storage services, electronic and commercial equipment repairs and telecommunications equipment, the Pioneer Press reported.

Budget negotiators are hurrying to finalize a tax plan – and put the finishing touches on a $38 billion state budget plan – by Monday's target adjournment for this session of the Legislature. Miscommunication among leaders has slowed negotiations, MPR reported.

DFL lawmakers, who control both chambers in the Capitol, seek to erase a projected $627 million budget deficit, but also raise new money. The Pioneer Press reported that Dayton said 36 percent of the new revenue would be allocated to education, 31 percent to deficit reduction, 20 percent to property tax relief and 5 percent for economic development and housing.

Republican lawmakers, who have not been involved in the high-level, last-minute negotiating, have called for restraint.

Senate Minority Leader David Hann, R-Eden Prairie, said the DFL's tax increases were not necessary, the Star Tribune reported. “We’ve got a $600 million problem; you don’t need to raise two to three billion dollars in revenue to solve a $600 million problem.”

Dayton and DFL leaders outlined the plan Thursday night:

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