JULY 1: NEW BUDGET AND TAXES GO IN EFFECT
Despite the economic upsurge, state taxes and spending will increase by billions
St. Paul – All economic indicators show that Minnesota’s economy surged in 2011 and 2012 for the first time in nearly a decade. The common-sense, fiscally responsible budget put in place in 2011 helped, but it was the ingenuity and creativity of Minnesota workers and business owners that did the hard work to produce a large increase in state tax revenue.
Based on this economic expansion, Minnesota tax collections have gone up by several billion dollars since 2010, meaning more money for education, health and human services and other important government functions. The unfortunate news is that, even with this significant increase in tax collections, the 2013 state legislature raised your taxes while increasing state spending by almost 10 percent.
On July 1 the new state budget goes in effect along with $2.1 billion in tax increases, millions in additional fees, and well over $3 billion in more government spending. Because of the nature of some of the tax increases, border communities like ours will find it harder to compete with neighboring states.
Here is a partial list of the tax increases, many of which go into effect on July 1:
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Cigarette tax increase of $1.60 per pack
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New fourth tier income tax (second highest in the country), retroactive to January 2013, resulting in a 25 percent tax increase for some small businesses
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Expansion of sales tax to internet purchases
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Expansion of sales tax to DirectTV and Dish Network
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Expansion of sales tax to IT services
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New tax on health insurance premiums to pay for state Health Insurance Exchange
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New tax on farm equipment repairs
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New estate tax that will hit some farmers, making it more difficult to keep the family farm
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Increased tax on rental cars to 9.2 percent
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Driver’s license fee increase
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Motor vehicle sales tax increase on certain vehicles
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Imposing a new gift tax
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New “warehouse tax” imposed on businesses that will increase the price of every product, including food, sold to Minnesota families (effective April 1, 2014)
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New county wheelage tax on every vehicle that your family owns, to be imposed at the discretion of the county board
Already we have seen some negative economic results from these tax increases, as Amazon.com has eliminated their Minnesota affiliate program as of July 1. This will wipe away the income that Minnesota entrepreneurs have counted on for many years. Also, businesses like Target have made it clear that the new warehouse tax, affecting retail sales as well as groceries, will hurt Minnesota—if not repealed soon!
Thankfully, many other harmful tax increases that were talked about were not implemented.
The state budget that begins on July 1 will be the biggest in history, by far. The various bills add over 1,200 new state government jobs. Incredibly, the childcare unionization bill may result in creating 8,000 quasi-state government employees out of small business childcare providers in our state! More county government jobs will be needed as a result of the Obamacare health insurance mandate. Almost every area of the budget saw spending increases, some rightly so like K-12 education, while a lack of legislative discipline caused some state agencies to be funded higher than these departments requested.
Many people have contacted me recently voicing their strong concerns over the new budget. They have also told me we should be focusing on what worked, letting the private economy thrive while focusing on our budget priorities, like education. I very much agree. But over the next two year period, government will grow by 10 percent while the economy recovers at 2 percent growth.
Thank you for attending one of the three town hall meetings Senator Nienow and I held last week. At one meeting a local business owner informed me that 60 percent of his time was spent not on improving his business for his customers, but on governmental issues, including the new regulations and costs involved in Obamacare that will fully go into effect next year. Ironically, he told me that the small business he owns and works tirelessly at cannot, by federal law, provide health insurance for himself or his wife.
Although the 2013 legislative session has adjourned, I welcome your continued input. Please feel free to contact me at (651) 296-5377 or rep.bob.barrett@house.mn. Happy Independence Day!!
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Rep. Barrett can be reached by phone at (651) 296-5377. He can also be contacted via e-mail at rep.bob.barrett@house.mn, or via U.S. Mail at 287 State Office Building, St. Paul, MN 55155.