The DFL rolled out its tax plan Monday, just as many taxpayers were hurrying to meet today’s filing deadline for their 2012 taxes.
The nearly $2.5 billion revenue-raising plan, while mostly devoid of any new sales taxes, would create a new fourth tier income tax rate; beef up alcohol and cigarette taxes; and close some corporate loopholes.
House Majority Leader Erin Murphy (DFL-St. Paul) stressed that, as the omnibus finance bills make their way across the House floor, their future is linked to the tax bill. The spending bills and the revenue bill “cannot be unhinged,” she said. “The revenue in the tax bill, allows us to balance our budget, it allows us to pay back our schools, and it allows us to invest in our future – like job creation and stronger schools.”
On the spending side, DFLers say the tax bill would help the majority party meet its goal of paying back the $850 million owed to the schools, erasing the state’s projected $627 million deficit, and it “makes strategic investments in education, middle class tax relief and job creation,” said House Speaker Paul Thissen (DFL-Mpls) during an early afternoon press briefing.
Rep. Ann Lenczewski (DFL-Bloomington), the bill’s sponsor, is expected to unveil a delete-all amendment HF677 during a Monday night meeting of the House Taxes Committee, which she chairs. The group is scheduled to take public testimony Tuesday on what will then be the omnibus tax bill, vote on it Wednesday or Thursday have it ready for House Ways and Means Committee consideration on Friday.
The bill would raise income tax rates to 8.49 percent on individuals with taxable income greater than $400,000 per year for joint filers. Thissen, pointing to possible bipartisan support, said the plan is similar to the federal agreement reached by President Obama and Speaker of the House John Boehner as part of their end-of-the-year budget deal to avoid the so-called “fiscal cliff.”
The new fourth-tier taxpayer would also see a 4 percent surcharge for each year in the next biennium to allow for repayment of the school shift. During the two-year time period, Minnesota’s 12.49 percent top rate would give it the distinction of having the third-highest rate in the nation.
The committee’s Republican lead characterized the bill as “taxes gone wild.” Rep. Greg Davids (R-Preston) restated his party’s contention that the state’s financial problems lay with too much spending and not a lack of revenue. At a different media briefing, he countered Thissen’s assertion that the tax bill presents a balanced approach. “If this is a balanced approach, I’d hate to see an unbalanced approach.”
Taxes on alcohol and sports memorabilia
The bill proposes new taxes on alcohol and tobacco. Taxes on a pack of cigarettes would increase $1.60. Excise taxes for liquor, beer and wine would be raised as well. Thissen said that the amount on a 12-ounce glass of beer would be about 7 cents. Tax credits would be created for smaller wineries and breweries. This new revenue is expected to generate about $350 million annually for the state’ General Fund.
Except for provisions dealing with sales taxes for online purchases, Thissen said all other sales tax provisions were dropped from consideration. “We don’t believe that the conversation about sales tax is ripe right now,” he said. The bill, however, contains the new memorabilia tax proposed in HF1743, introduced last week. Although going into the state’s General Fund, the money would be diverted to help fund the state’s portion of the stadium to house the Minnesota Vikings.
Credits and reductions
The new revenue proposed in the bill would help pay for a property tax relief package through the Homestead Credit Refund; a change to the renter’s credit program; and local government aid increases.
The bill would align the state to some popular federal income tax reductions and credits, including deductions for higher education tuition; mortgage insurance premiums; and classroom expenses for teachers. It would also provide tax reductions through the standard deduction for married filers; increase phase-out threshold for the student loan interest deductions and various provisions accelerating depreciation and expensing of business property.
An upfront exemption for capital equipment purchases, a change the business community has been seeking, would be provided. It would also beef up the state’s Angel Investor Tax Credit and Historic Rehabilitation Tax Credit programs.
The bill contains help through local taxes and abatements for three major projects – expansion to Bloomington’s Mall of America; a new building proposed by 3M in Maplewood and the Rochester/Mayo Clinic proposal- Destination Medical Center.