Dear Neighbors,
Last week, the Minnesota House Taxes and Ways and Means committees began scrutinizing Governor Mark Dayton’s budget proposal and determining what it means for Minnesotans.
I share the concerns expressed by organizations and job creators that will be negatively affected by the Governor’s plan, including newspapers like the Star Tribune (“A damaging tax plan fails the fairness test”).
Here are the details:
· Increases taxes by $3.7 billion
§ $2.1 billion from an expanded sales tax on consumer goods and services, such as admissions, memberships, over-the-counter drugs, haircuts, personal services, wedding planning, veterinary services, newspapers, magazines, and more, although we have yet to receive a final list from the governor’s administration
§ Increased 7-county metro transit sales tax by .25%
§ Business-to-business transactions are taxed, such as legal, accounting, architecture, specialized design, computer, management consulting, advertising, employment, and business support services
§ New taxes on online purchases and digital downloads (e.g., Amazon and iTunes)
§ $370 million from the cigarette tax by adding $1 per pack
§ 2% increase on highest 2% of earners—$250,000 married, $200,000 head of household, or $150,000 individual for total of $1.1 billion raised
· Increases state spending by $2.5 billion—the governor’s target of $37.9 billion would grow state spending 153% more than the economy
§ All-day Kindergarten—although it is only partially funded
§ $52 per pupil in K-12 formula
§ $159 for special education
§ $80 million increase in Local Government Aid, a nearly 20% increase (though Blaine does not currently receive LGA)
§ $80 million additional funds to U of M
§ Up to a $500 property tax rebate for homeowners, subject to state and federal taxation
· Proposed ~$176 million in cuts
· Delays paying back the $1.1 billion owed to schools until 2017, which will increase the debt by $150 million
I have some serious concerns about Gov. Dayton’s proposal, as the majority of his tax increases will negatively affect the middle class. This comes at a time when families are already experiencing diminished take-home pay because of the 2% increase in the payroll tax.
What’s more, I’m concerned that the business-to-business taxes will decrease opportunities for the state’s employers, entrepreneurs, innovators, and us, average Minnesotans.
A Pioneer Press editorial explains why there is such cause for concern by describing what economists call “tax pyramiding,” an accumulation of hidden taxes paid for by businesses and consumers. (Read more here: “Burdening Minnesota business”.)
For instance, we are starting to see the effects a seemingly “minor” tax has on businesses and employees as a result of the 2.3% excise tax on small medical device makers. Boston Scientific recently announced its plan to cut 1,000 jobs, and the Wall Street Journal notes that the tax will be passed on as added costs to hospitals and patients. 25% of this tax will come from Minnesota companies, like Medtronic, mounting to $10 billion out of our state economy. Fortunately, U.S. Representative Paulsen and Senator Klobuchar are introducing a bill to repeal the tax, but at the same time I fear that this trend of down-sizing will broaden to every corner of the state if the governor’s budget goes into effect.
The St. Paul Pioneer Press ran two editorials expressing concern about the negative impact Gov. Dayton’s plan will have on business, the state budget, and, ultimately, the middle class. You can read them by clicking here:
1) When spending exceeds growth: disaster, ultimately
2) State budget: Don't undermine Minnesota businesses
What do you think about the governor’s budget proposal? Email or call my office to give me your feedback.
My door is always open to the people and priorities of Blaine. Please contact me at any time regarding matters of state government. You can locate my contact information on the left-hand side of this email, or feel free to follow me on Twitter.
Have a great week,
Tim