By Rep. Paul Anderson
Coming up with a two-year plan for funding Minnesota’s state government is no simple matter. Gov. Mark Dayton’s budget proposal for the upcoming biennium runs over 2,000 pages, and even though it was released last week, questions still remain about certain aspects of the document.
Receiving the most attention, at least from the e-mails I’ve been getting since last Tuesday, is the governor’s plan to expand the base of our sales tax while at the same time lowering the rate. Under his plan, the rate would drop from 6.875 percent to 5.5 percent while more items and services would be subject to the tax.
Clothing items priced over $100 would be subject to the revised sales tax, as would a variety of services such as bank charges, legal and accounting fees, auto and household repairs, computer services, and personal instruction. Also on the list of taxable items released last Friday is “admissions.” I asked for a clarification, wondering if admissions to high school athletic contests would fall under that classification, but didn’t receive a response by the time this was written.
Another interesting addition to the taxable list was “memberships,” and the examples given were health clubs and the YMCA. A constituent wrote and asked about membership dues to service clubs, but again no clarification was received on that yet, either.
We should find out more this week about exactly what would be taxed and what would be exempt under Dayton’s plan. It appears that agricultural parts and repairs would remain tax-exempt, but so far no official word has been given. Those items have not been included on the list of newly taxed goods or services.
Nearly lost in all the discussion of the sales tax is the addition of a fourth tier income tax rate for Minnesota. Single filers with incomes over $150,000 and joint filers over $250,000 would be subject to the new rate of 9.85 percent which, if enacted, would be one of the highest in the nation. According to figures from two years ago, Stearns County had 750 returns that would have hit that threshold, Douglas County had 185, and Pope County 57. Other counties from this area were Kandiyohi with 258 returns at that level and Stevens County with 72. Statewide, the number is 41,600.
In all, the governor’s plan calls for $3.7 billion in new taxes while cutting spending by $225 million. Among those areas in line for additional funding is education, where all-day kindergarten and special education would be given more money. In addition, the basic state aid formula would increase by $52 per student. To the surprise of many, the Governor didn’t propose paying back the school shift in the coming biennium that begins in July. He pushes that out two more years, into the next budget cycle.
As mentioned in a recent column, that makes sense to me. We are making good progress in re-paying the shift, and another payment should go out next month. If we were to pay it all back in the new budget, which would take new funding, money that instead could go to another purpose such as all-day kindergarten and special ed.
Keep in mind that this is the governor’s proposal. The Legislature, after receiving the February forecast, will craft its own budget. However, since the Democrats control both chambers and the governor’s office, I look for the Legislature to rely heavily on Dayton’s figures. The sales tax proposal seems to be the most problematic, with business interests generally against the expansion. That’s the area most likely to see major changes from the governor’s plan.
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