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Gov. Dayton's Budget Proposal Draws Mixed Reaction

“Governor Dayton's budget proposal raises taxes on all Minnesotans,” Sen. Karin Housley (R-St. Mary's Point) told Stillwater Patch on Tuesday. “Everyone – not just the rich – will pay more to grow government.

Calling for an end to the “fiscal games” and “accounting gimmicks” of the last decade, Gov. Mark Dayton released his biennial budget proposal Tuesday, which he says will eliminate the state’s $1.1 billion budget deficit and balance government spending and revenue over the next two fiscal years.

Dayton’s proposals include cutting the sales tax rate from 6.875 percent to 5.5 percent, while broadening the tax to many goods and services that are currently exempt. He also seeks to create a new income tax bracket on the wealthiest 2 percent of Minnesotans, while providing a rebate for the first $500 of property taxes paid going forward from 2013.

Some of the governor’s other proposals include the following:

  • Reducing the corporate tax rate from 9.8 percent to 8.4 percent, dropping Minnesota’s rate from fourth to 12th highest in the nation
  • Raising the cigarette tax 94 cents per pack
  • Extending the sales tax to clothing costing more than $100
  • Increasing local government aid $80 million a year and county program aid $40 million per year
  • Increasing funding for special education by $125 million

“The result of these changes in the income tax, sales tax and property tax would be to reduce the total state and local taxes paid by most Minnesotans,” Dayton said.

Republican lawmakers dispute that assertion.

Dayton’s proposed budget calls for $37.9 billion in state spending for FY 2014-2015, a statement from the Senate Republican Caucus reads. This is roughly a 7.6% increase in spending over the current FY 2012-13 budget. His new budget includes a tax increase of $3.7 billion of new or expanded taxes on Minnesotans.

“Governor Dayton's budget proposal raises taxes on all Minnesotans,” Sen. Karin Housley (R-St. Mary's Point) told Stillwater Patch on Tuesday. “Everyone – not just the rich – will pay more to grow government. Minnesotans will feel the burden of new taxes on auto services, over-the-counter drugs, health club memberships and clothing items priced over $100.

“For many Minnesotans, that's a tax on their new winter coat. With the current state of the economy, it’s disappointing to see proposed tax increases that really affect the bottom line of family budgets.”

Watch video of the Republican House and Senate leadership's response to the governor's budget here.

Senate Minority Leader David Hann (R-Eden Prairie) called the proposal “a budget expansion” requiring about $3.7 billion in new revenue.

“There’s a host of things that are going to be taxed in Minnesota that were not taxed before,” he said.

Indeed, many business-to-business services that had not been previously taxed — such as accounting, legal or consulting services — would be under Dayton’s proposal.

But the governor said the new taxes would be offset by the lower across-the-board rate, which he termed “the largest sales tax rate reduction in Minnesota history.”

In addition to his revenue proposals, Dayton called for funding increases across a number of areas, totaling $732 million for the 2014-2015 biennium.

His budget proposes a $240 million increase in higher education funding, $118 million in K-12 funding ($52 in new money for every student in the state), and an additional $86.5 million in economic development that he says will create thousands of jobs.

“During much of the previous decade, governors and legislatures spent more than they raised and filled gaps with shifts, borrowing, and other one-time gimmicks, rather than facing and fixing their problems,” Dayton said. “The budget I am proposing today will end those games and gimmicks and replace them with honest accounting and responsible fiscal management.”

The governor said he expects significant tax reform could be difficult to achieve during this legislative session—but said the proposal is “a starting point.”

House Speaker Paul Thissen (DFL-Mpls) said the budget Dayton introduced today is not going to be the budget that is introduced into law.

“It’s going to go through the legislative process,” Thissen said.

Watch video of the DFL House and Senate leadership's response here.

“I’m looking forward to working with Governor Dayton and other legislators to help manage our state’s budget in a responsible way,” Housley said. “My priority is to ensure our state government is more effective and efficient with taxpayer dollars, and that we don’t unnecessarily take dollars away from Minnesota families.”

-- Jonathan Mohr of the Minnesota House of Representatives Public Information Services contributed to this report.

yomammy January 23, 2013 at 01:07 PM
LOL MN....nothing but shifting the taxes and "fees" around....
Pete January 23, 2013 at 02:03 PM
Seems politicians that campaigned against all of this, now somehow cant stop it and only complain about it. Stop the whining-and stop the spending. If a new employee complained about the job they where given that they told the employer they could do, well then, they might just get fired. Get to it Housley and get the job done.
Randy Marsh January 23, 2013 at 03:08 PM
I'm not in favor of a tax on services, but I think there are some reasonable ideas being tossed around. I would prefer to see a much smaller increase in the state's budget, however. Of course, Housley is going to be outraged when her expensive bags, sassy pant suits and spa services are going to cost more. I would also add that listening to Housley talk about anything that requires insight is the equivalent of asking her husband about the NBA. What a missed opportunity by the electorate to not elect Julie Bunn.
HHF34 January 23, 2013 at 04:52 PM
The ruling party in St Paul has never met a tax increase or expansion they didn't like. If anyone thinks for a second that any rate is going to decrease, refer to first sentence. It's not just winter coats, it's work boots, business suits, it's gym shoes for the kids, it's a prom dress, it's hockey gear, not exactly luxury items of clothing, and all multiplied by the number of individuals in the family. Take the incentive to visit Minnesota and you're going to see a lot of tax dollars dwindle. "Hey, let's go to the MOA (instead of our local mall) since MN doesn't have tax on clothes" will quickly turn into "Let's just go to the mall here in LaCrosse/Eau Claire/IA/SD/etc." which means all the stuff they do spend money on for their trip won't get spent here (hotel, gas, restaurant, activities, etc.).. This proposal is going to raise taxes the most on the backs of the poor and middle class Minnesotans, at least we've got a legislator who is going to point out the practical side.
yomammy January 23, 2013 at 06:27 PM
At least Dayton has excellent and clear speaking skills....
Karen January 23, 2013 at 09:05 PM
Housely's just getting her tea party rhetoric out in her first chance to say something.
Susan January 23, 2013 at 11:54 PM
Didn't she use her first chance to say something to introduce a resolution to congratulate her husband and his team? I mean, that's great and all but it's hardly getting down to serious state business. I'm not holding my breath on the sales tax decrease, but it's funny that she ignored it AND the reduction in the corporate tax rate (something that has driven businesses away from Minnesota for years), while railing against the increases on some items and services. More partisan same-old, same-old - I guess I shouldn't be surprised. Sigh...
Frank McGruber January 24, 2013 at 12:09 AM
LOL. That's a good one. He always sounds drugged and always looks as if he is about to cry.
Cindy January 24, 2013 at 05:42 AM
All these tax gimicks result in a net increase in revenue for the govt to spend. That means there are tax increases. They are on everyone. And they are on top of all the Federal tax increases from Obama Care and the Fiscal Cliff legislation. Daytotn will brag about the income tax or property tax decreases, but at the end of the day, people will be able to make decisions about how to use their own money. P.S. What's with the obsession with attacking Senator Housley? Why is the Patch so unprofessional as to allow it?
Cindy January 24, 2013 at 05:43 AM
Pardon, people will be able to make decisions about how to use LESS of their own money.
Susan January 24, 2013 at 02:14 PM
"Obsession with attacking Senator Housley?" Obsession; defined as an idea or thought that continually preoccupies or intrudes on a person's mind. Attack; defined as Verb: Take aggressive action against (a place or enemy forces) with weapons or armed force: "in December, the Japanese attacked Pearl Harbor". Noun: An aggressive and violent action against a person or place: "he was killed in an attack on a checkpoint". Cindy, I'm not sure if your comment was directed at me, but if it was, I think you may be over-embellishing a bit. Senator Housley has chosen to be a public figure. This comes with positives and negatives...most realize this. I have agreed to tone done the mean spirited rhetoric but that does not mean that I will not call out errors in judgement, mistakes, and/or hypocrisies. I thought we wanted to hold our elected officials to a more accountable, higher standard? Well, at least one that they claim to hold themselves to... It is my understanding that Patch follows a user agreement with its commenters. As long as that is not violated, they encourage free speech, debate, and conversation. Senator Housley campaigned vigorously on stopping the gridlock, which would logically mean that one must tone down the partisan rhetoric. Stating only the negative, one-sided ideas of a proposal is about as partisan as you can get.
Bryan Ring January 31, 2013 at 04:11 PM
Thank you! Regarding "Tax on Services".

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