Thursday night, legislative leaders and Governor Dayton added some details to the tax portion of the previously announced budget framework, which reduces regressivity of the tax system, funds investments made in the other parts of the budget, and solves the budget deficit.
Some of details of the tax plan that were filled in through the updated budget framework include:
- A 9.85 percent income tax rate on taxable income above $250,000 for married couples and $150,000 for single filers. This represents a 2 percent rate increase that affects the 2 percent of Minnesotans with the highest incomes.
- A $1.60 per-pack increase in cigarette taxes, as proposed in the House omnibus tax bill.
- $400 million in property tax reductions.
- Corporate tax changes.
- Revenue-neutral sales tax reform, which will apply the sales tax to certain business services; exempt cities and counties from paying the sales tax on purchases; and allow an exemption for business purchases of capital equipment at the time of purchase, replacing a cumbersome refund process.
- The framework no longer includes a temporary income tax surcharge to fully reverse the school funding shifts during the FY 2014-15 biennium. Instead, any positive balance at the end of the 2013 fiscal year will be applied to reversing the school funding shift, as will any positive balances in future forecasts as in current law. If these measures are not sufficient to fully reverse the shifts in the FY 2014-15 biennium, policymakers will take additional action next session.
- There will be no increases in alcohol taxes.
We're watching the tax conference committee closely for further details to be filled in as the final tax legislation emerges, and will write more as the committee completes its work.