By Rep. Paul Anderson
July 1 marks the beginning of the new fiscal year and a new two-year budget cycle for Minnesota. It’s also the starting date for several new taxes to take effect as the recently completed legislative session saw the controlling party pass more than $2 billion in new or increased taxes. It’s my concern that we are making Minnesota uncompetitive with our neighboring states, especially in the areas of personal income tax and business taxes.
Minnesota’s top two percent of income earners will see their tax rate increase by more than 25 percent, going from 7.85 percent up to 9.85 percent. That was one of the campaign pledges of Gov. Dayton and he, along with the Democratic Legislature, made good on that promise.
The tax on cigarettes and other forms of tobacco will also be going up on July 1. There will be a one-time tax on retail stock that day, with the proceeds going into a special fund to serve as a back-up funding source for the Vikings stadium. The increased tax amounts to around $18.60 on a carton of cigarettes, and it’s projected to bring in $440 million. The problems with such a large increase as this are two-fold; first, because of the high cost of smoking, some will either cut back or be forced to quit altogether. For health reasons, that is good, but it will also result in less tax revenue coming in to the state. And second, it will probably result in some degree of a “black market” for cigarettes, especially in areas close to our borders. If cigarettes are purchased out-of-state, the result is no tax revenue for Minnesota.
I visited with one tobacco retailer from the area, and he commented that the last time taxes were raised on cigarettes, his business volume dropped by around 30 percent. He’s guessing that this time, because the tax increase is larger, the drop in business will be even bigger.
A brand new tax scheduled to also take effect the first day of July is a sales tax expansion on the labor portion of business and commercial repairs. For farmers, that means a large portion of their repair bills will now be subject to the tax. I have heard rumblings that this portion of the tax may be eliminated when the Legislature comes back into session next February, so farmers and others affected by this tax are encouraged to keep their receipts, in case there is a retro-active suspension. It’s expected that this new tax alone, if it remains in place, will cost farmers an additional $26 million per year!
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This spring has been challenging for those trying to get their crops planted. Some parts of the state have been impacted more than others, with southeast Minnesota having some of the most difficult planting conditions. There will be thousands of acres that won’t get seeded this year, as farmers utilize the “prevented planting” portion of their crop insurance.
The late spring has also been concerning for dairy and other livestock producers. Their winter supplies of feed were running short, and the cold, wet spring caused the hay crop to be late, as well. Winter-kill was a problem in some areas, making the already-short supply of alfalfa hay even shorter. As if that wasn’t enough, with rain seeming to fall nearly every day in May and early June, it was nearly impossible to cut hay and get it “put-up” in good condition. This past week end was more normal again, and I’m guessing lots of hay was chopped or baled during that time.
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