Democrats in the Minnesota House are proposing to raise taxes on Minnesota’s wealthiest residents, on cigarettes and on alcohol. House DFL leaders released some of the details of their tax bill today.
It would create a new income tax rate for couples with a taxable income of $400,000 per year or more, and a temporary income tax surcharge on couples earning $500,000 or more per year. The plan would raise cigarette taxes by $1.60 a pack and raises alcohol taxes by roughly 84 cents per 12 pack of beer.
House DFL leaders say the tax hikes are needed to fix the budget over the long-term.
“After a decade of deficits that have largely been balanced on the backs of middle-class Minnesotans, we need a new direction as badly as we need a change in the weather,” House Majority Leader Erin Murphy, DFL-St. Paul, said. “That is what we’re offering today.”
The plan would also provide property tax relief for homeowners, increase a tax credit for renters, and provide some tax breaks for businesses.
House Speaker Paul Thissen, DFL-Minneapolis, said the cigarette and alcohol tax increases would offset state costs for damages caused by their use.
“There is overwhelming evidence that tobacco and alcohol consumption cost the state economy billions of dollars every year,” Thissen said. “These user tax increases will allow our state to cover some of those costs.”
Thissen said the temporary income tax surcharge would end in two years after a shift in the K-12 school payments is paid back. Gov. Dayton has said he opposes a temporary income tax increase and increasing alcohol taxes.
Republicans were quick to criticize the plan.
Republican Representative Greg Davids of Preston was quick to criticize the DFL plan.
“This proposal is a new chapter in DFL reality TV called ‘Taxes gone wild” Rep. Greg Davids, R-Preston, said. “That’s what we have here. If this is a balanced approach, I would hate to see an unbalanced approach.”
Here’s a breakdown:
New 4th Tier Income tax rate of 8.49 percent of taxable income above:
$400,000 married joint filers
$200,000 married filing separate
$226,200 single filers
$340,700 head of household
A temporary income tax surcharge of 4 percent on couples with a taxable income over $500,000. The money would be used to pay back the K-12 school shift. Democrats say the plan would blink off after school shift is paid back. (The plan raises $1.2 billion).
The plan would increase the cigarette tax to $2.83 per pack. It would also tax “little cigars” and moist snuff.
The plan would increase the excise tax on alcohol. House research says the tax hike would increase $1.58 for a bottle of spirits, 47 cents for a bottle of wine and 84 cents for a twelve pack of beer.
The plan also increases the property tax rebate for homeowners. House Democrats say 315,000 homeowners would get bigger refunds. About 116,000 homeowners would become eligible for the refund.
The plan would also increase the renter’s credit, allow manufacturers to get an up-front sales tax exemption for capital equipment purchases and provide a credit for employers who hire qualified veterans.