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Dayton’s new budget plan still has effects locally

BEMIDJI – Some of the more contentious provisions of Gov. Mark Dayton’s budget proposal didn’t make the cut when his new proposal was released Thursday.

But the revised budget would still have effects locally.

The plan includes income tax increases on the wealthiest 2 percent of Minnesotans while boosting funding for education and economic development. But the sales tax on business-to-business services was scrapped after business leaders decried the idea.

“I think it’s safe to say the business community has breathed a sigh of relief,” Lori Paris, president of the Bemidji Area Chamber of Commerce, said Thursday.

Local units of government were in line for tax increases on business-to-business services as well.

Beltrami County Commissioner Joe Vene, who is also the president of the Association of Minnesota Counties, said counties like the one he represents would have had to pay much more for legal, accounting and architecture services if that tax was in place.

“We’re appreciative that the governor was amenable to take another look at his budget proposal,” Vene said.

The new budget also increases Local Government Aid by $80 million a year, as Dayton previously proposed, while making minor tweaks to the distribution formula, according to Matt Swenson, a Dayton spokesman.

Under the governor’s plan, Bemidji would receive $3.3 million in 2014, $400,000 more than it’s set to get this year in LGA. The aid is one of the city’s biggest sources of funding, along with property taxes.

“Increases in local government aid and local schools funding hasn’t happened very much over the past decade,” state Rep. Roger Erickson, DFL-Baudette, wrote in a statement. “Now those local units are about as stripped down as they can be and it’s time to reinvest in those areas that make our state great, our students and teachers.  Governor Dayton’s budget does that.”

A sales tax on clothing was also discarded from the governor’s original budget, a positive sign to Bemidji Woolen Mills owner Bill Batchelder.

“(I’m) just very thankful,” he said. Batchelder had been contacting local legislators since Dayton’s proposal was introduced, saying a tax on clothing would be detrimental to small businesses like his.

Other controversial proposals remain in the governor’s proposal, however.

That includes a tax on so-called “snowbirds,” or people who spend less than six months living in the state. The proposal also has a 94-cent per-pack increase on cigarettes, which is designed to cut down on smoking and raise revenue.

Roger Belgarde, manager of Save Tobacco in Bemidji, said it will have another effect: hurting his business. He said customers won’t be able to pay for the price hike and will cut down on smoking.

“I won’t go out of business, but it’s surely going to hurt,” he said. “It’s either buy a pack of cigarettes or buy five pounds of burger for the table. So you know who’s going to win out on that.”

Belgarde, who doesn’t smoke, has been handing out leaflets asking his customers to contact legislators to oppose the increase. He questioned why tax increases on liquor weren’t proposed.

Minnesota’s current tax rate on cigarettes – $1.23 – is lower than the national state average of $1.48 per pack, according to the Campaign for Tobacco-Free Kids. North Dakota’s is among the lowest at $0.44 per pack, while Wisconsin charges $2.52 per pack.

The Campaign for Tobacco-Free Kids, based in Washington D.C., argues that cigarette tax increases bring in more state revenue while reducing smoking rates.

“In every single state that has significantly raised its cigarette tax rate, pack sales have gone down sharply,” according to a fact sheet on its website.

John Hageman

John Hageman covers North Dakota politics from the Forum News Service bureau in Bismarck. He attended the University of Minnesota in the Twin Cities, where he studied journalism and political science, and he previously worked at the Grand Forks Herald and Bemidji Pioneer.  

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