The proposed budget will decrease the sales tax rate from 6.875 to 5.5 percent, costing:
The governor also proposes a bump in the motor vehicle rental tax, from 6.2 to 9.05 percent.
Overall, the amount of sales tax collected will be raised by $2,098,710,000.
For a total of
Cigarette and Tobacco Tax
The proposed budget includes a significant bump to the cigarette excise tax.
$0.48 per pack tax. $0.75 health impact fee.
$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
(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
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:
But the proposal also closes loopholes and expands the types of businesses covered, including:
Repealing the current law subtraction for foreign royalties and provisions for foreign operating corporations (FOCs)
Requiring that all sales to this state of a unitary business be included in the sales factor for this state.
Adopting statutory language requiring business transactions to meet an economic substance test to be allowed in determining Minnesota taxable income.
Amending statutes to conform to the federal law treatment of foreign entities in Section 701 of the Internal Revenue Code.
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:
Factoring in changes, corporate taxes will bring in a revenue of
(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:
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:
Total Tax Changes
Taken together, the revenue changes proposed would raise
(6% increase from forecast)
The governor is proposing to increase expenditures by a total of
Optional all-day kindergarten ($49.2 mil)
Formula shift ($118.5 mil)
Special education ($124.8 mil)
Early childhood scholarships ($44 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
City aid (LGA) ($80 mil)
County aid ($40 mil)
Health & Human Services
Raised Medical Assistance rates ($27.2 mil)
Access to quality care for high needs children ($20.2 mil)
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