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Dayton proposes dropping gas tax, boosting license tab fees

ST. PAUL — Gov. Mark Dayton’s willingness to drop his demand for a gas tax hike to fund road repairs in exchange for higher license tab fees is drawing mixed reaction from local lawmakers.

ST. PAUL — Gov. Mark Dayton's willingness to drop his demand for a gas tax hike to fund road repairs in exchange for higher license tab fees is drawing mixed reaction from local lawmakers.

Dayton unveiled two transportation funding proposals on Monday aimed at breaking the legislative logjam at the Capitol. One of the proposals includes a 5-cent gas tax increase and would boost license fees by $250 million per year. The second proposal gets rid of the gas tax hike and instead seeks a $400 million per year increase in license tab fees. Both plans includes a half cent metro-area sales tax increase for transit and $200 million per year in general fund dollars. Initially, Dayton had been pushing for for a wholesale tax on gasoline, resulting in at least a 16-cent per gallon tax increase.

Republicans praised Dayton for putting a plan together without a gas tax increase.

"We had some great movement today. The governor coming out with two proposals — one with part of a gas tax and one with no gas tax is certainly a move forward, and it suggests that there's a path," said House Transportation Committee Chairman Tim Kelly, R-Red Wing.

Democrats raised concerns about the size of the license tab fee increases being proposed, saying they'd rather see a gas tax increase be part of the mix. Rep. Tina Liebling, DFL-Rochester, said she was surprised the governor took the gas tax increase off the table. She is worried about how the higher license tab fees would impact lower-income residents.


"In many ares of the state — even in Rochester — if you don't have a car, you can't get to work. I want to make sure we don't price anybody out of their ability to get to work and drive legally," Liebling said.

Pressure builds as deadline nears

Efforts to reach an end-of-session deal have been stymied by disagreement over a long-term transportation plan. House Republicans favor a plan with no tax increases that would be funded through a mix of existing auto-related taxes, borrowing and general fund dollars. Their plan does not include money for metro-area transit. Senate Democrats recently made an offer that included a 12-cent gas tax increase and a half cent metro-area increase for transit.

Pressure on lawmakers to reach a deal is building as the Legislature's constitutionally-mandated deadline of May 23 creeps closer. Legislative leaders have said it's important to figure out how much money should be set aside for transportation so that negotiations can begin on taxes, additional spending and a public works bill. One area lawmakers agree on is the need. The governor and legislative leaders say the goal is to come up with a transportation package that would generate $600 million per year in additional funding for transportation upgrades.

Dayton told reporters that he has shown he is willing to compromise to get a sustainable, long-term transportation funding bill passed this session. He warned that if House Republicans aren't willing to compromise and meet Democrats half way, there will be no transportation bill this year. As a result, the state's roads will continue to deteriorate.

"We are going to choke the life blood out of Minnestoa's future economic growth if we don't move forward with this kind of transportation package," Dayton said.

Legislative leaders in both the House and Senate threw cold water on Dayton's proposals. GOP House Speaker Daudt said House Republicans don't support the substantial increase in license tab fees the governor is proposing. In the Senate, DFL Senate Majority Leader Tom Bakk said both of the governor's plans would require Republican support in order to pass — especially the proposal without a gas tax increase. He said Democrats are worried about the size of the license tab fee increases and the use of general fund dollars. They favor a larger gas tax increase.

License tab fees for a new $30,000 vehicle would climb from $2,200 over 11 years to $2,980 under the governor's first proposal. The cost would jump to $3,532 under Dayton's second proposal.


Local lawmakers weigh in

Rep. Jeremy Miller, R-Winona, said he is still optimistic lawmakers can reach a deal on transportation. He said the governor's willingness to abandon the gas tax increase is a positive development.

"It's certainly a step in the right direction. The gas tax is a regressive tax and I've heard from several constituents with complaints about a gas tax," Miller said.

Rep Kim Norton, DFL-Rochester, said she is concerned about a major increase in license tab fees. She'd rather see a smaller gas tax increase and a slight license tab fee increase. She also wants to see House Republicans demonstrate they are willing to compromise.

"A compromise means both sides give. The governor has given a lot already and the fact that he gave two options — (Republicans) had better counter back with something," Norton said. "If it's not either of these two, what is it?"

Rep. Dan Sparks, DFL-Austin, said his biggest concern is making sure there is plenty of road and bridge funding for rural Minnesota if lawmakers OK a sales tax increase for the metro area.

Sparks added, "We just have to make sure that greater Minnesota's interests are taken care of as well."

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