Rep. Paul Thissen, House DFL Leader, Sen. Tom Bakk, Senate DFL Leader, and Gov. Mark Dayton in a file photo. The DFL leaders announced Sunday, May 12 a budget deal for the state of Minnesota. (Alex Kolyer for MPR, file)
Gov. Mark Dayton and DFL legislative leaders have agreed on a tax and spending framework that raises income taxes on top earners, expands the sales tax to some yet to be determined “non-consumer services,” raises the cigarette tax and pays back the money owed to schools from earlier budget deals through a temporary income tax surcharge.
It also erases a $627 million budget deficit, boosts funding for public education by $725 million and provides $400 million in property tax relief.
Heading into the final week of the 2013 session, Dayton appeared at a Sunday news conference with House Speaker Paul Thissen, DFL-Minneapolis, and Senate Majority Leader Tom Bakk, DFL-Cook, to announce the deal. Much of the attention was on the tax revenue target of just over $2 billion.
The income tax increase thresholds are $250,000 taxable income for couples and $150,00 taxable income for individuals. Dayton said the rate for that new fourth tier still has to be determined. He stressed that they are not raising taxes on the middle class, with the exception of the cigarette tax.
“We’re specifically focused on the very wealthiest top 2 percent,” Dayton said. “The sales tax details are to be negotiated, but it’s focused on business activity, not on consumers. There won’t be a sales tax on clothing. There won’t be a sales tax on consumer services.”
The House tax bill included a 4 percent surcharge on people with incomes above $500,000 to pay back schools. But Sen. Bakk said the final version won’t be that high.
“We don’t know exactly what that the number is, but it’s going to be a much smaller percentage than what you’ve heard,” Bakk said. “The reason is, we’re going to take the fund balance on June 30 in this current biennium that we’re in and apply that to the school shift before we consider imposing any kind of a surcharge.”
On the spending side, Speaker Thissen said it will be up to the conference committees to sort out the final details.
“The good news is though we share the same priorities in terms of spending in most of these budget areas,” Thissen said.
Republicans were quick to criticize the budget framework. House Minority Leader Kurt Daudt, R-Crown described it as disappointing news from the DFL on Mothers’s Day.
“Their gift for every hardworking mother in the state of Minnesota is going to be a more than $2 billion tax increase,” Daudt said. We were hoping to hear that some of these plans were going to be reeled back and scaled back. Unfortunately, everything we feared is still on the table.”
Senate Minority Leader David Hann, R-Eden Prairie, said the DFL plan is simply more “overtaxing, overspending and overreaching.”
Both Hann and Daudt said they are not interested in the DFL plan for an $800 million bonding bill this session. GOP votes are needed in both chambers to reach the supermajority needed to pass bonding bills.
The legislative session ends May 20.
Here are the targets:
E-12 Education: $475 million
Higher Education: $250 million
Tax Bill Revenues: $2.05 billion
Tax Aids and Credits: $400 million
Net Tax Bill Revenues: $1.65 billion
Health and Human Services: ($50 million)
Environment and Agriculture: $23 million
Public Safety and Judiciary: $102.76 million
Jobs/Commerce/Housing: $89 million
State Government: $28.8 million
Capital Investment: $64 million (debt service assuming an $800 million bonding bill)
Education Shift Reduction: $860 million (repayment amount contingent on FY13 balance and future forecast improvements)