Will Taxing the Rich Solve Minnesota’s Budget Problems?

Supporters of Gov. Mark Dayton’s plan to tax the wealthy filled a hearing room claiming the state needs more revenue to meet Minnesota’s needs.

Gov. Mark Dayton turned to the wealthy to eliminate approximately half of a $6.2 billion budget deficit, proposing a new top tax bracket and an income surtax that together would give Minnesota the nation’s highest income tax rate.

Advocates of the plan stated that without a tax increase lawmakers would be forced to make budget cuts to education, health care, transportation and other essential services to erase the state’s projected $5 billion budget deficit.

House Tax Committee Chairman Greg Davids, R-Preston -who does not support the plan-, said he scheduled the hearing to ensure that it got fair consideration.

Dayton’s bill would increase income taxes on the wealthiest 5 percent of Minnesotans by creating a fourth tax bracket of 10.95 percent for joint filers with taxable incomes of more than $150,000.

It would also increase taxes on health care providers and corporations with foreign operations, while eliminating almost $1 billion in spending for programs including MinnesotaCare health care and nursing homes.

The tax increases and spending cuts are contained in Dayton’s proposal for a two-year, $37 billion budget that guides more money into education but could also cost about 800 state workers their jobs.

According to Dayton his plan protects 95 percent of state taxpayers from tax increases, while making the top earners pay a proportionate share of income in state and local taxes. The plan would restore recent levels of state aid to cities and counties, which Dayton said would help stave off local property tax increases

House Speaker Kurt Zellers said he was taken aback by the “epic” size of the tax hike for those with six-figure incomes. He said Dayton’s permanent and temporary increases would shoot Minnesota past Hawaii and Oregon for a dubious distinction for the highest tax rate, causing business leaders and others to flinch.

Supporters however, included advocates for a wide array of services, as well as a few high earners who said they were willing to pay higher taxes to help the state provide critical programs and services.

University of Minnesota student Emma Wright of Minneapolis said she was missing a “very expensive calculus class” to testify for tax increases to prevent proposed budget cuts to higher education and transportation that would be “devastating to students.”

The House sponsor of Dayton’s bill, DFL Rep. Michael Paymar of St. Paul, said the current tax system is unfair because middle-class taxpayers shell out a larger share of their income than the wealthy in state and local taxes.

But acknowledging GOP opposition to the bill, he said, “The governor is not inflexible. He is willing to compromise.”

For information on tax-related subjects for the State of Minnesota, please visit the Minnesota Department of Revenue website at http://taxes.state.mn.us/Pages/index.aspx