Dayton will eliminate income tax surcharge

Gov. Dayton announced today that he will eliminate his 3 percent proposed income tax surcharge on Minnesotans earning more than $500,000 a year. Dayton also said he intends to reduce the level of his proposed cuts to Health and Human Services programs like nursing homes, MinnesotaCare and community action grants. Dayton also said he’ll restore cuts to transit programs.

He made the announcement after state finance officials announced that the state’s budget picture improved by more than $1 billion. The forecast shows the budget deficit is projected to be $5.03 billion in the next two year budget.

Dayton is still proposing to increase the state’s income tax rate on Minnesota’s top earners to 10.95 percent. He said his decision to eliminate the surcharge means Minnesota would not have the highest income tax rate in the country if his plan is enacted.

Republicans have said they don’t support any tax hikes and will balance the budget through spending cuts alone. Here’s the release from Dayton’s team:

Following a forecast showing a nearly $1.2 billion improvement in Minnesota’s budget deficit, Governor Mark Dayton today moved quickly to revise his proposed budget to promote economic growth and maintain his commitment to a fair, responsible and balanced budget.

Dayton’s revised budget will eliminate his proposed surcharge, thus fulfilling his promise to keep Minnesota’s top tax rate below the nation’s highest, while improving progressivity. In addition, Dayton’s revised budget, to be presented formally in the coming weeks, will: significantly reduce approximately $200 million in proposed cuts to the Department of Human Services for seniors’ long -term care including nursing homes and home health care, Minnesota Care, and community action grants; restore the funding for metro and rural transit to eliminate any state-imposed need for fare increases; restore cuts to fire safety training; increase the research and development credit to promote Minnesota job growth; and provide $5 million to the Department of Employment and Economic Development (DEED) for the Minnesota Investment Fund (MIF) and the DEED Redevelopment Fund.

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