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Gov. Mark Dayton thinks his tax reform proposals are good for the whole state, but he says they will benefit outstate Minnesota even more than the Twin Cities metro area.
“Middle income taxpayers are going to pay less,” Dayton said in a telephone conference call with outstate media Wednesday.
Dayton said his proposal to increase taxes on the wealthiest 2 percent of Minnesotans will hit only 1 percent of outstate residents.
“I hear so much (from Republicans) about affects on small business owners — that they all have incomes over $250,000 and that’s just not true in general and it’s certainly not true in Greater Minnesota.”
On Tuesday Dayton laid out a budget to close an expected $1.1 billion budget deficit and increase some spending, mostly in education. He calls for changes to the sales tax system that would reduce the tax from 6.875 percent down to 5.5, but would expand it to clothing items over $100 and to services, ranging from legal services to hair cuts.
The plan would also provide up to $400 annual property tax rebates for home and business owners and would cut corporate taxes.
Dayton said the lower but broader sales tax would mean most middle-income Minnesotans would pay about the same in sales taxes as now. But he said reform is needed because it would provide more stable revenue streams during economic ups and downs and because it addresses big shifts in where people spend their money.
In the 1950s, one-third of consumer spending was on services and two-thirds on goods. Those figures are now switched.
“The current (tax) system isn’t designed for the economy we have now.”
While the sales tax burden should be about the same, Minnesotans will get a break on property taxes, Dayton said.
“We’re relying more and more on property taxes and both homeowners and businesses are hurting from that.”
Dayton also reaffirmed his desire to have a bonding bill this year and pledged he would include funding for the Mankato civic center expansion and renovation that’s been unsuccessfully sought for years.
Dayton said he expects little if any support from Republicans when it comes to his budget and tax proposals, noting they’ve rejected many of the concepts in the past.
And while he now is working with a friendly DFL majority in both the House and Senate, the governor said he knows there is a long way to go.
“I’m under no illusions about how challenging this will be to get through the legislative process.
“One thing I’ve earned is everyone is for change as long as it doesn’t happen to them.”
Dayton said he told legislative leaders of both parties that if they don’t like his ideas then they need to give him new ideas that close the deficit and increase spending “for education and job creation.”
But he said he believes a change in the tax system is widely favored.
“If we do nothing we’re going to leave people where they are, which is widely unsatisfied with the current system.”
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