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Budget 101: A graphic primer to Dayton's budget proposal

The numbers below are comparisons of Gov. Dayton's budget proposal with the forecast for the 2014–2015 biennium. All plus and minus dollar amounts reflect changes to the general fund balance.

Income Tax

Beginning in the 2013 tax year, the governor proposes creating a new tax bracket for the richest 2 percent of Minnesotans:
Couples with
taxable income of
$250,000+
(per year)
Individuals with
taxable income of
$150,000+
(per year)
The rate for the top bracket would increase from 7.85 to 9.85 percent (two percentage points), affecting about 53,600 returns and earning an estimated:
$1,098,800,000
Additionally, the governor is proposing a property tax rebate for all Minnesota homeowners.
$500*
per homeowner
* Or the amount of the previous year's property tax bill if less than $500
Why is this item listed under income tax?
There are approximately
1,502,000 homesteads
in Minnesota
The rebate is estimated to cost:
-$1,438,600,000
The budget also adds an income tax on part-time residents (the so-called Snowbird Tax).
The proposal includes taxes on Minnesota-based income (as per current policy) and adds a share of outstate income based on number of days spent in Minnesota.
Expected to raise
+$30,000,000
Overall, collected income tax is projected to go down slightly, decreasing by $308,000,000 because of the proposed property tax rebate.
For a total collected of
+$17,128,000,000

Sales Tax

The governor has proposed a dramatic base expansion projected to raise sales tax receipts by:
+$4,464,746,000
  • Digital products
    $31,200,000
  • Consumer Goods & Services
    $1,060,000,000
  • Business Services
    $3,200,000,000
Tax exemptions for certain items, such as telecommunications equipment and court reporter documents, will also be repealed adding some $134,500,000 in revenue to the above total.
The proposed budget will decrease the sales tax rate from 6.875 to 5.5 percent, costing:
-$2,137,500,000
The governor also proposes a bump in the motor vehicle rental tax, from 6.2 to 9.05 percent.
+$15,000,000
Overall, the amount of sales tax collected will be raised by $2,098,710,000.
For a total of
+$12,221,897,000
(20.7% increase)

Cigarette and Tobacco Tax

The proposed budget includes a significant bump to the cigarette excise tax.
Current
$0.48 per pack tax.
$0.75 health impact fee.
Proposed
$1.42 per pack tax.
$0.75 health impact fee.
Total fees increase from $1.23 to $2.17 per pack.
The current tobacco products excise tax of 35 percent will increase to
55 percent
(of wholesale price)
The total tax and fees on tobacco products will increase from 70 to 90 percent of the wholesale price.
Combined, the increase in cigarette and tobacco taxes will raise an additional
+$369,900,000

Corporate Tax

The governor recommends several changes to corporate tax policies, including dropping the rate from 9.8 to 8.4 percent (moving Minnesota from 4th to 12th highest among states).
A cost of:
-$318,000,000
But the proposal also closes loopholes and expands the types of businesses covered, including:
  1. Repealing the current law subtraction for foreign royalties and provisions for foreign operating corporations (FOCs)
  2. Requiring that all sales to this state of a unitary business be included in the sales factor for this state.
  3. Adopting statutory language requiring business transactions to meet an economic substance test to be allowed in determining Minnesota taxable income.
  4. Amending statutes to conform to the federal law treatment of foreign entities in Section 701 of the Internal Revenue Code.
  5. Eliminating the unintended double-deduction by excluding dividends received from a real estate investment trust (REIT) in calculating the deduction allowed to a corporation for dividends received deduction (DRD) from another corporation
Earning an additional:
+$322,900,000
Factoring in changes, corporate taxes will bring in a revenue of
+$1,959,000,000
(a 0.26% increase from forecast)

Other Revenue Changes

Other tax changes proposed included levy change interactions, statewide property tax reduction for businesses, and a Medicare surcharge change, for a total of:
-$26,691,000
Non-tax revenue changes include adjustments to transfers, the largest of which is -$50,000,000 in revenue from the health impact fee for cigarettes & tobacco (assuming people will quit smoking). The total change in non-tax revenues is:
-$12,099,000

Total Tax Changes

Taken together, the revenue changes proposed would raise
+$2,127,280,000
(6% increase from forecast)

New Spending

The governor is proposing to increase expenditures by a total of
+$1,031,000,000
K-12 Education
+$344.2 mil
  • Optional all-day kindergarten ($49.2 mil)
  • Formula shift ($118.5 mil)
  • Special education ($124.8 mil)
  • Early childhood scholarships ($44 mil)
Higher Education
+$250.4 mil
  • State grant program ($80 mil)
  • MnSCU funding ($46 mil)
  • MnSCU retain staff ($34 mil)
  • U of M funding ($80 mil)
Property Tax Aids & Credits
+$117.1 mil
  • City aid (LGA) ($80 mil)
  • County aid ($40 mil)
Health & Human Services
+$128.3 mil
  • Raised Medical Assistance rates ($27.2 mil)
  • Access to quality care for high needs children ($20.2 mil)
Public Safety
+$86.1 mil
  • Department of Corrections ($38 mil)
  • Trial courts ($29.2 mil)
Transportation
-$25.6 mil
  • TED Program ($20 mil)
  • Met Council transit (-$46.8 mil)
Economic Development
+$70.1 mil
  • Minnesota Investment Fund ($30 mil)
  • Minnesota Job Creation Fund ($25 mil)
Debt Service
$28.5 mil
Environment & Energy
+$17.6 mil
  • Aquatic invasive species management ($7.5 mil)
State Government
+$13.9 mil
  • Explore Minnesota tourism ($15 mil)
Agriculture
+$670,000

Budget data provided by Minnesota and Management Budget. Code, techniques, and data on Github.

All icons from The Noun Project. Couple and Person by Jens Tarning; Home by Andrew Fortnum; Palm Tree by YouGou; Handshake by Remy Medard; Coat by Maurizio Fusillo; Car by Benjamin Orlovski; Cigarettes by Julia Soderberg; Pipe by Okan Benn; Cigarettes (single) by vivien wack; City by inna belenkey; Education by Thibault Geffroy; Caution by Jose Hernandez; Economic Crisis by Camilo Roa; City by Carla Gomez; Paper by Tom Schott; Tree by Brazil; Train (no rights reserved); Accounting by Scott Lewis; Government office (no rights reserved); Tractor by Olivier Guin; House by Nicolas Ramallo.

Comments (9)

Proposed Budget Proposal Primer

This is a terrific presentation -- but 19 pages to print out???????? Couldn't the document be reduced to accomodate those of us who don't want to print out so many sheets of paper and color ink, at that?

Good point

We have updated the piece a bit and it should be more friendly to print, though still about 9 pages. Thanks for the comments.

Budget 101

I hope this can be widely distributed - it is so easy for the lay reader to read and understand.

I will print it on the backs of already used paper!

Rave review

This makes me feel all warm inside. A real public service. More, please.

I must comment and commend...

Minnpost is my source for local news.This is a perfect example why. It appears put together with a lot of care and attention to detail and does something near impossible to do, as testament by the preceding comments: interest, involve and inform the taxpaying public about the taxes the pay. Very admirable, Minnpost.

On that note, I support the increase in the income tax bracket, though I think it's a strange arbitrary figure that's borrowed from the federal debate. Since when was the top 5% not wealthy with no greater ability to pay than the bottom 95%? I support this because I do not buy the argument that the wealthy are the job creators and need governments to incentivize them making money. The way tax brackets work is that: You Still Make More Money For Each Additional Dollar You Earn. (They do not typically retroactively tax income up until that point.) If someone doesn't want to try to earn another dollar because they only get $0.45 instead of $0.47 out of the next dollar... well, that's just unAmerican and unMinnesotan, in my somewhat humble opinion. I believe the job creators are the innovators and today's highly educated and highly advanced technology world, the innovators will be young people and we need to mitigate their risks to allow them to blossom into such to (1) increase employment, (2) increase income, (3) increase purchases subject to sales tax and (4) acquire and improve property. That is my "One Man Tax Plan" in summary.

I do not support the homeowners property tax rebate. I do not support it because it does not affect me, it does not affect my peers (under thirty) and I see it as a way of buying votes from rural Minnesota and the elderly at the expense of the young and MN business community. Perhaps, if the increase in the homeowners' rebate had a corresponding proportional increase in the renter's rebate I may find it more amenable, but I think there would be a better way to spend $1.5B from expanded sales tax. The $500 will, in my economic understandings, incentivize cities to raise property taxes $499. Everyone's still a winner... accept my young peers who rent and pay higher prices to pay for business property taxes, but they don't understand what's going on.

I do support a broadening of the sales tax base and simplification of the rate (regardless of decrease in the rate). It doesn't make sense that we have a tax that calculates to the 100,000th decimal point (ie 0.06875). Yes, hundred-thousandth. (3/8 may have looked nice on paper, but nobody considered efficiency, compliance and administration.)

In sum, I am disheartened that the debate is being dominated by a discussion of rates and rebates rather than, "What can people comply with and what is efficient to administer?". To me, that is the tax reform Minnesota is asking for and needing.

Simplified classification of properties for taxing purposes. Greater federal conformity of income taxes that do not involve so many Minnesota pet projects. Simplification of sales tax calculation and determination, which does not include a 7-county transit tax on top of a 5-county transit tax. (I feel the governor should embrace an 87-county, statewide approach to bettering the state's transportation network and livable communities rather than pick the metro winners.) Better technological tools and informational resources. Better representation.

I am looking for new ideas and I have several of my own I hope to share in due time. I am still waiting for the Governor to return my e-mails, however. He's busy so I'll give him a few more weeks to get back to me... maybe it would help if you told him I was trying to get in touch with him. Thanks,

~Bob Helland
"Bob Helland for Governor 2014"
onemantaxplan @ gmail.com

New Business Model

Hi Bob -
We now in live an era were a Shared Governance model can function for the state's practitioners and policy-makers. We need to identify what a five-year transition looks like to move from a state-centric governance model for environment, health and education to a shared governance. We can no longer cut or spend our way to a solution on these three big items: https://prezi.com/c1vrjlsybaeb/gieseke19a-strategy/

Thank you, Tim.

I am impressed. The compass is intuitive and the concept is admirable and necessary. I support this from the limited understanding I now have. I find it has a lot of room to grow within an initiative like the Citizens League's "Quantum Civics" and recent comments from the Bush Foundation executive regarding "leadership" (not equivocated with governing) by removing the hierarchy of legislative and executive government bureaucracy. I am also a strong supporter of "independent" political candidates as you may have inferred. Best of luck to you in yours.

You are more than welcome to contact me directly to share ideas, and I look forward to more of your offerings to this debate as framed within "shared governance" and "EcoCommerce"

How do we put it in practice together and make these more than buzzwords? (rhetorical) I'll keep my eyes and ears tuned.

~Bob Helland
onemantaxplan @ gmail.com

Another Big Gov't Spender?

Bob, don't you think that our current congress and governor will have their way with just about everything until 2014? At that point, the people will realize that they'd made a mistake by sending this bunch to St Paul. You don't sound like you have something different to offer.

Your quote below says it all, so say no more Bob.

"If someone doesn't want to try to earn another dollar because they only get $0.45 instead of $0.47 out of the next dollar... well, that's just unAmerican and unMinnesotan, in my somewhat humble opinion."

So what you're saying is that it's "American and Minnesotan" to steal and additional $.02 from a producer? For that matter, you are saying it's "American and Minnesotan" to steal $.53 to $.55 of every additional dollar a producer earns?

Why don't you just take your example to the extreme since you are supportive of it growing in this direction... steal $.99 of every dollar a producer earns and let them keep $.01. Would that not be fair to a producer to at least keep something from their efforts? Would they not maintain the same motivation to earn taxable money?

You cannot steal freedoms from one group of people to the benefit of another and call it fair and just. It's quite the opposite. Plus the public and greater good would best be served to allow productive individuals to keep what they earn, reinvest it, give it willingly to charity, create new technologies, more efficient products, goods and services for everyone to benefit from.

Gov't has never produced a thing. Big Gov't can only take, waste by administering, then redistribute.

Thank you for engaging my thoughts, Bryan.

I greatly appreciate your willingness to engage me direct, Bryan.

As for what ideas I do have to offer, please stay tuned to Minnpost and reform-related articles because I believe I have a lot to offer and Minnpost is my source for local news, partially because of the thoughtful and insightful commenters here like you.

Now, I must beg your pardon, and state that you have misinterpreted me and what I have said about the Minnesotan and American spirit. I am simply saying that neither are "quitters". We will not quit. We may complain, but we will not stop. I am also simply stating the truth that if there is an economic opportunity for a business or individual to profit, they will pursue it and that's the fundamental understanding we equivocate on the whole as "capitalism". An interesting odd-couple of "producers" to borrow your word, though I would not adhere with that categorization of wealthy individuals, are the so-called "partners" in Berkshire Hathaway, Warren Buffet (left-leaning) and Charles Munger (right-leaning). Both have publicly acknowledged this economic truth: if there is money to be made, no matter how small, business will find a way to make it in spite of taxes.

I am saying that it is Minnesotan and American to work hard for the next payday in spite of a marginal decrease in the paycheck.

Whether they make $200 or $200,000, a business will pursue that because it is income, it leads to profit. I fully accept your criticism in your context that to tax someone to the point where the "opportunity cost" of doing something else (e.g. not working, relocating, accepting government payments) may become the best option is dangerous and has the potential for economic catastrophe, but I feel by and large, Minnesotans are hungry for fulfilling work that keeps them afloat and moves them forward in the 21st century in contrast to quitting, moving to another state or being unmotivated. I also believe that these added burdens can be afforded by that small segment of the economy more so than the burdens facing others.

Taxes are redistribution, there is no other way to look at them. I put forward my support of this income proposal because if you, like I, had your ear to the voices and fingers to the pulse of the young people in Minnesota who are the future of this state, they believe in this and they need better resources to elevate them to their economic (income/employment/revenue) potential. I also think that Gov. Dayton's budget plan is riddled with political tactics rather than comprehensive ideas. Governing does involve leading with consensus and I embrace the spirit of my peers and a large majority of Minnesotans and Americans who support higher income taxation for those with greater "ability to pay", however, seemingly less "willingness to pay".

This is not my central aim, however.

As you will see in the coming days and weeks, my income tax plan is not a "rates game"; it is not "tax X people B tax rate" and "tax Y people C tax rate", rather, my proposal is of an economic nature: increase the employment and income of all people. Those that are most vulnerable and those with the most upward mobility are young people who struggle in this state for various reasons, of which the complexity of our sales tax system plays no small part and the dearth of qualified affordable authorities and guides is paramount. To increase their income would increase income tax revenues, increase sales tax revenues from their heightened consumption and increase property tax revenues and bolster local tax bases from their augmented ability to acquire and improve property in Minnesota.

I am for Big Strong Individuals more so than an arbitrarily Big Government and I feel my peers do not have a "dog in this tax fight" that will advocate a system that will increase their chances of becoming so, which is why I am testing the waters in my outspoken opinions. I feel I have an excellent capacity for intergenerational communication and understanding, and I hope this response is a start in bringing someone like you to the common ground I see before us.

I think you will be most interested, Bryan, in my sales tax recommendations for the Governor and State of Minnesota because it is strongly in support of "producers" in a more well-defined context, that being the MN business community (of all stripes) rather than individuals with uncommonly high incomes.

Again, I encourage you to continue to engage my ideas and follow my public outreach on Minnpost, or also feel free to contact me directly for a more personal discussion at the e-mail below.

~Bob Helland
onemantaxplan @ gmail.com