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.
Beginning in the 2013 tax year, the governor proposes creating a new tax bracket for the richest 2 percent of Minnesotans:
taxable income of
taxable income of
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:
Additionally, the governor is proposing a property tax rebate for all Minnesota homeowners.
* 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
The rebate is estimated to cost:
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
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
The governor has proposed a dramatic base expansion projected to raise sales tax receipts by:
Consumer Goods & Services
Tax exemptions for certain items, such as telecommunications equipment and court reporter documents, will also be repealed adding some $134,500,000 in revenue to the above total.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:
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).
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
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)
- Department of Corrections ($38 mil)
- Trial courts ($29.2 mil)
- TED Program ($20 mil)
- Met Council transit (-$46.8 mil)
- Minnesota Investment Fund ($30 mil)
- Minnesota Job Creation Fund ($25 mil)
Environment & Energy
- Aquatic invasive species management ($7.5 mil)
- Explore Minnesota tourism ($15 mil)