Why did Dayton adjust his tax plan from his campaign promise?

Governor Mark Dayton’s proposal to raise income taxes on Minnesota’s top earners went much deeper than what he promised during his campaign for governor.

On Tuesday, Dayton released a budget plan that would raise income taxes on single filers who make $85,000 a year or more after deductions. During the campaign, Dayton said he would only increase income taxes on single filers who had an after tax income of $130,000 a year or more.

When asked about his decision to increase taxes on a wider group of people, Dayton responded:

“One thing that changed over the course of the last fall is that the November revenue forecast raised the projected budget deficit by about $400 million so I had to balance that out.”

In other words, Dayton had a bigger budget deficit to fill and he relied on increased tax revenue to do it. Dayton was careful to note that only 2.3% of single filers would be affected by his change. He also said he wanted to achieve balance between single filers, head of households (who will see a higher rate if their after tax income is $130,000 or more a year) and couples (who will see a higher rate if their after tax income is $150,000 or more a year).

“I found that ultimately I had to raise the rates and the income to a level on which they could begin,” Dayton said. “But somebody in the increment of income on the amount of difference there is a matter of a couple hundred dollars or so.”

Dayton also said during the campaign that he would not make Minnesota’s income tax rate the highest in the nation. It will be, at least temporarily, for people who have an after tax income of $500,000 or more a year. The rate would be 13.95% for tax years 2012, 2013 and 2014 under Dayton’s plan. That’s because Dayton is proposing a temporary surtax of 3% on those filers that would expire in three years.

“This is two times what he campaigned on when he ran for governor,” GOP Sen. Geoff Michel said. He was one of several Republicans on Wednesday to say Dayton’s budget plan exceeded his campaign talking points.

Michel is right that his plan impacts more people but it’s not exactly true to say it’s double what he ran on. Dayton suggested during the campaign that he could generate roughly $3.6 billion in revenue from things like an income tax hike, closing corporate tax loopholes and a state owned and operated casino. But Dayton had to accomplish his budget plan by expanding areas where he could find more money since some of the estimates he made during the campaign were off.

For example, Dayton dropped his push for a casino. He also grossly overstated the amount of money he could collect from certain segments of the population. For example, he suggested during the campaign that he could raise $500 million from “snowbirds” who live only part of the year in Minnesota. The Revenue Department estimates the plan will collect $15 million.

Side Note:

The initial reporting (including mine) was fuzzy on who would be impacted by Dayton’s income tax plan. That was because Dayton’s own press releases had conflicting figures. The different reporting was due to numbers that showed Adjusted Gross Income whole others showed After Tax Income. Sorry for the error.

  • Mark Lokowich

    Which Dayton are we to believe?

  • Paul Evans

    So the new definition of rich is anyone who makes over $85,000 per year. I think Mr. Dayton’s plan is to drive anyone who has the ability to create private sector jobs out of the state.