Dayton, DFL leaders agree on budget targets

budget deal

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

Transportation: 0

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)

  • Aaron

    So did they drop the alcohol excise tax?

  • Jimbo

    Incredible. No reform just higher taxes and more money for the public union folks. I am cutting my charty donations to help make up the difference. They can ask Dayton for some of my money.

  • rev

    Tax the rich. Better yet, return their tax rate to the GOP’s “Golden Age” of the 1950’s…. when it was 90%.

  • Sherman

    Alcohol excise is still on the table and a real possibility. THere is an online petition to sign via Facebook against it. Contact your Senators and Dayton quickly and tell them not to endorse anything that increases taxes on liquor if your are opposed to that particular tax increase.

    Another report I read says they are also trying to include a .5 cent increase to the Twin Cities sales tax to bay for transportation costs and/or a 5 cent gas tax increase.

  • chase van arsdale

    Wow! Our stupid governor & the stupid dems must really think that cigarette smokers are rich {like them} but they are not! Tax someone rich, you hacks!

  • Ernie

    Looks like a good budget plan. Undoing “T-Paws” years of smoke & mirrors and robbing school children.

    I’m OK with paying more for drinks and gas (never smoked) when the return is better educated citizens, infrastructure improvements and quality care for “the least among us”.

    Let’s all give a little and make Minnesota better.

  • Denny

    Thank God we have competent government again.

    I feel like I’m living in the real Minnesota for the first time in about thirty years.

    Maybe we can start to repair the damage now.

    This is just the early beginning stage.

  • Jon

    There is no such thing as “tax the rich”. The dollars we take from the rich will all be pulled forward through higher prices for our goods and services or through the impact of lower employment and charitable expense as a result of their budget adjustments. If someone nets $3000K a year after taxes this year, they will next year too. The extra $5k going to Mr. Dayton will actually come from about $5 each of 1000 middle class citizens.