By Rep. Jeff Howe
July 1 was the day when many of the $2.1 billion in tax increases and hundreds of millions more in fee increases Gov. Mark Dayton and the legislative majorities passed this year took effect.
Key changes include online purchases, a new fourth-tier income tax rate, increased cigarette taxes and increasing taxes on businesses. New fees – including those on driver’s licenses and vehicle registration – also went into effect.
Here is an overview:
Income taxes
The new 9.85 percent rate on the state’s high-income earners impacts:
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married people who file jointly with a taxable income of more than $250,000;
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married people who file separately with a taxable income of over $125,000;
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heads of household with a taxable income of over $200,000; and
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single filers making over $150,000.
Sales taxes
Taxes on a pack of cigarettes rose by $1.60 (from the current $1.23 to $2.83).
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Other tobacco products also are taxed at higher rates, including taxing “little cigars” as cigarettes and taxing each container of “moist snuff” at the same rate as a pack of cigarettes or 95 percent of the wholesale sales price, whichever is higher.
Vikings stadium bailout
Part of the revenue from the first year of the cigarette tax increase will be used to make up for the failure of electronic pulltabs to meet revenue projections to fund the state’s commitment to a new Minnesota Vikings stadium.
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To prevent retailers and wholesalers from stockpiling product before that date, a one-time new cigarette tax equal to the tax increase is imposed on current inventories. That is expected to raise $32.4 million, of which $26.5 million will go to the special fund used for the stadium.
Online taxes
A sales tax also has been added for online purchases such as ringtone downloads, music, videos, books and online computer games.
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Digital textbooks required for college courses will receive exemptions.
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Additional revenue for the stadium, if needed, will come from corporate tax increases on revenue from sales in the state.
Business taxes
Businesses pay new sales taxes on warehousing and storage (not including mini-storage); electronic and commercial equipment repair and maintenance; and repealing the current sales tax exemption on telecommunications equipment purchases.
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The new taxes on warehousing and storage will be imposed in April of 2014.
DMV fees
New fee increases are in place on driver’s licenses and vehicle registration.
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The option of a $5 wheelage tax has been expanded to include all 87 counties in Minnesota, with the amount increased to $10 in 2014 followed by up to $20 beginning in 2018.
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New law also increases a flat amount charged for some older model collector vehicles (from $90 to $150).
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Starting in 2017, fees for new vehicle titles will increase from $6.25 to $8.25, while a $5.50 title transfer fee is eliminated.
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The filing fee for a new or renewed driver’s license or state identification card is increased from $5 to $8.
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