A reformed Local Government Aid (LGA) program could become law during the 2013 legislative session, thanks to the leadership of Governor Dayton—who included a significant funding increase for LGA in his proposed budget—and Rep. Ben Lien of Moorhead and Rep. Jim Davnie of Minneapolis—who assisted a broad coalition of city groups in coming together on a reform plan that will benefit cities and taxpayers across Minnesota.
The major revenue raiser in the Governor’s revised tax plan is his 4th tier income tax, which increases the rate from 7.85 percent to 9.85 percent. It would apply to taxable income in excess of $250,000 for married joint filers, $200,000 for heads of households, and $150,000 for single filers. As the Governor has frequently noted, this tax increase would affect the wealthiest two percent of Minnesota households.New data released by the Dayton administration this week gives Minnesotans the first glimpse of how fourth tier tax taxpayers would be distributed geographically across Minnesota. While there is some variation around the state in terms of the concentration of fourth tier taxpayers, the highest concentration in any single county (Carver) is 3.4 percent. In the majority of counties, the concentration is less than one percent.Six counties have twenty or fewer fourth tier taxpayers, which are excluded from this analysis due to data privacy concerns. Continue Reading
Minnesota legislators are working to close a corporate tax loophole that places smaller business at a competitive disadvantage to larger multi-state firms. Adoption of a corporate throwback rule would close this loophole while generating badly needed revenue that could be used to increase state investments or reduce other taxes. Continue Reading
Of all the regressive taxes (those falling on people with the least ability to pay) rental property taxes are the most regressive category of property tax, according to the 2011 Minnesota Tax Incidence Study (MTIS). While renters do not pay property taxes directly, the cost of property taxes are passed on to them in the form of higher rents. To reduce the regressivity of rental property taxes, Minnesota has instituted the Renters’ Property Tax Refund (or Renters’ PTR), which directs property tax relief to low income renters. Dollar for dollar, no program in the state does more to reduce tax regressivity than the Renters’ PTR. Continue Reading
Even with a proposed $80 million increase to city Local Government Aid (LGA), real (i.e., inflation-adjusted) per capita LGA will remain less than what it was in 1972—the first year of the LGA program. That’s due in large part to city LGA cuts made since 2002.
Governor Dayton’s sales tax proposal has drawn considerable scrutiny and some criticism. The most common complaint is that the Dayton budget would expand the sales tax base to include many goods and services that were previously tax exempt. However, for the most part, there is ample precedent in other states for the sales tax base broadening that Dayton is proposing. Continue Reading
Despite all of the right wing groups’ handwringing about tax increases under Governor Dayton’s budget proposal, Minnesota’s “price of government” under the Dayton plan will actually be less over the next four years than during the previous four.
