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Pioneer Editorial: Dayton plan fairly settles state budget

The state budget proposed Tuesday by Gov. Mark Dayton goes along ways filling a $6.2 billion hole and yet be balanced at day's end.

We believe Republicans will be hard-pressed to find a budget solution based solely on cuts that won't harm thousands of vulnerable Minnesotans and raise property taxes on middle class Minnesotans trying desperately to climb out of the Great Recession.

As expected, Gov. Dayton's plan hinges on raising revenue from the state's most wealthy, but he has come up with a way that is most unique and out-of-the-box thinking.

He would create $4.1 billion in new revenue with a new fourth-tier of state income tax for couples making $150,000 or more at 10.95 percent, enact a 3 percent surtax on incomes over $500,000 that would blink off with a balanced budget, raise the state property tax on homes valued more than $1 million, apply health care provider surcharges that would be reimbursed through Medicaid and close certain tax loopholes.

While the amount seems like a lot, and it involves raising income taxes, the total revenue picture affects only 5 percent of Minnesotans. It means 95 percent of Minnesotans will see no tax increase -- including property taxes as Gov. Dayton also proposes no cuts to Local Government Aid or County Program Aid.

The governor argues that the wealthy need to step up to the plate and pay their fair share in taxes. Tax cuts in 1999 and 2001 can no longer be held as the state's population has grown, demanding more government services. The pending retirement of baby boomers will also strain state resources.

On the spending side, the Democratic governor is proposing a $37 billion biennium budget, a 7.5 percent increase or adjucted 3.2 percent a year increase.

Republicans already are blasting the plan as the state's largest tax hike in history and are drawing lines in the sand. They want to stick with the current budget of $32 billion, without regard of the need for increased state services because of demographics.

Hopefully both sides are serious about compromise. Republicans will finally have to give in on raising taxes. And we see room to compromise on cuts, with a $5 billion gap in spending between the Republicans and Gov. Dayton. The two sides need to recognize that the provision of state services needs to be prioritized, and that new revenues must be part of that solution.

If they can't agree on that, it will be a long summer.