Adopting Fair and Adequate Tax Reform

The Minnesota Budget Project supports tax reform that makes the tax system more fair and raises enough revenues to fund the state's priorities. In 2013, such reforms were needed to end the cycle of frequent deficits, budget gimmicks, and deep cuts to services by taking a balanced approach. We called for tax reform that included:

  • A targeted increase in the state's income tax based on the ability to pay.
  • Improved tax credits to offset increases in taxes not based on the ability to pay.

The tax bill passed in 2013 included these components, shared the responsibility for raising revenues more fairly, and raised new revenues to address the deficit and invest in schools, affordable college education, and other public investments in our future.

Issue Overview

Minnesota has faced significant gaps between public needs and the resources it takes to meet them. Since the early 2000s, frequent budget shortfalls have been the norm. The result was deep cuts to services and reliance on budget gimmicks that kicked the can down the road instead of putting Minnesota on a firm financial footing.

The February 2013 Economic Forecast showed Minnesota facing a $627 million revenue shortfall for the two-year budget cycle starting on July 1, 2013. The deficit was $1.5 billion when the impact of inflation is included.

Our outdated state tax system wasn't meeting Minnesota's needs. All Minnesotans benefit when we invest in our future prosperity, with all Minnesotans sharing the responsibility. A Minnesota household making over $446,961 paid 9.6 percent of its income in state and local taxes in 2010, while a middle-income household making $53,072 to $68,773 paid 12.2 percent.

Status

Governor Dayton signed House Bill 677, the omnibus tax bill, into law on May 23, 2013. The law addressed the state's budget deficit by raising revenues fairly and funding investments in our future prosperity. It also made significant progress toward making our tax system more fair.

The 2013 tax bill increased income taxes on the highest-income Minnesotans, and provided larger property tax refunds to many Minnesotans. It also raised new revenues to address the deficit without deep service cuts, and it invested in schools, affordable college education, workforce development and other public services that are crucial for a strong future.

More Information


Staff contact: Nan Madden, Director, 651-757-3084

 

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