Dayton Plan Includes Several Tax Changes

By Danielle Killey

Business tax changes have grabbed much of the attention after Gov. Mark Dayton’s budget proposal was released Tuesday, but a property tax rebate and new taxes likely would have an impact on Minnesotans, too.

The governor proposed a $500 property tax rebate for most Minnesota homeowners in what he said is an effort to offset the tax’s escalating cost.

“When I traveled around the state the No. 1 thing I heard is that property taxes are too high,” Revenue Commissioner Myron Frans said, referencing his more than 160 local meetings throughout Minnesota before the legislative session began. “We were looking for something that was immediate and direct.”

The $500 credit for homeowners, combined with a two-year freeze on businesses’ state property taxes, would be a way to do that, he said.

The renter’s refund program would not change.

Frans said property tax reform, not just relief, is a goal for the future.

The governor’s plan would create a new income tax bracket for couples making more than $250,000 in taxable income. The fourth-tier rate would be 9.85 percent. The highest rate currently is 7.85 percent.

Minnesota’s snowbirds would pay a pro-rated income tax under Dayton’s plan as well.

Cigarettes would be taxed an extra 94 cents per pack, bringing the total to $2.52. Increased cigarette and tobacco taxes would bring in about $370 million in new revenue for the state in the next two years.

Publications such as newspapers and magazines would be taxed, which drew strong protests when the governor spoke to the Minnesota Newspaper Association. The governor also proposed a quarter-cent sales tax increase in the seven-county Twin Cities area to fund transit.

The governor’s goal was to even out state revenues from property, income and sales taxes to make the revenue stream fairer and more stable, Frans said.

Jay Kiedrowski, a senior fellow at the University of Minnesota’s Humphrey School of Public Affairs, said he thinks the approach could be successful.

“The changes the governor’s proposed will have the impact of reducing the volatility of Minnesota’s revenues,” Kiedrowski said. “I think we would see a fairer tax system than we currently have, a more balanced tax system.”

Dayton has said he is open to different ideas if people disagree with the plan. But the budget must remain balanced, he said, and Frans noted all the pieces have to work together.

“It’s important to talk about this as a package,” Frans said. “This is really designed to be intertwined.”