Revenue Department pushes back against criticism of Dayton tax plan

The Minnesota Department of Revenue released a study today saying Gov. Dayton’s tax plan would be fairer to low and middle income Minnesotans than the current system.

“The bottom line is that the fourth tier tax increase and the homeowner property tax rebates are both very progressive and large enough to more than offset the impact of the more regressive portions of the full proposal,” the department said in the bulletin.

The department’s findings are based on the so-called SUITS Index that measures for progressivity.

Dayton’s tax plan raises income taxed on top earners, increases the cigarette tax and changes the sales tax. His sales tax plan would reduce the overall rate from 6.875 percent to 5.5 percent but would expand the tax to business-to-business services, consumer services and clothing items that cost more than $100. Dayton also wants to provide a $500 tax rebate to each homeowner in the state.

Dayton’s plan has been criticized by business groups who say it’s unfair. Some contend his plan to tax clothing and consumer services would make lower and middle income Minnesotans pay more.

Republicans tried to highlight those concerns during a brief debate on Senate floor today. They forced a vote on a routine procedural move on Dayton’s tax plan and worked to link Democratic votes for the procedural move as an endorsement of the plan.

“Many of us have said that we do not support this,” Sen. Julianne Ortman, R-Chanhassen, said. “So this is our opportunity to say no. We don’t want this bill in the Senate Tax Committee.”

Democrats complained that the Republican effort would limit debate on Dayton’s plan.

“I would urge that we do not exclude the public from this debate,” Sen. Rod Skoe, DFL-Clearbrook said. “The committee hearing process is the opportunity for the public to weigh in on these important issues, so I would ask that this bill has the opportunity to go to committee.”

Democrats were successful in sending the bill to the Taxes Committee. Skoe says he intends to hold hearings on Dayton’s plan soon.

The discussion over the state budget is likely to change next week. That’s because state finance officials are scheduled to release the next budget forecast. Gov. Dayton and lawmakers will use those figures to make final decisions on the next two-year budget.

  • Tony

    Is this the proper role of the Department of Revenue?

  • Tony, the Dept of Revenue is part of the executive branch, it is under the governor’s leadership, so yes, this is exactly the proper role of the Dept of Revenue.

    If you read the Dept of Revenue’s study (linked in the article), you’ll see they basically just used an objective scoring mechanism to compare the current tax structure with the proposed one. It may be push-back, but it at least seeks to push back based on evidence and objective measures, something I’d like to see more of.

    That said, the study is barely even a beginning in terms of actually defending the governor’s proposal. It offers no insight into how the SUITS scoring actually works or how it was applied. Also, the progressive/regressive nature of the proposed changes was only one of many criticisms. I’d like to see them address the potential impact of business-to-business VAT-style taxes, for example.