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Opinion: Overview of Gov. Dayton’s Budget

Rep. Joyce Peppin's newsletter update for Jan. 28, 2013, including details of a visit with area teachers.

The following was reprinted with permission from the Jan. 28, 2013 update from Rep. Joyce Peppin. Peppin represents several communities, including Maple Grove and Rogers.

Dear Neighbors,

In this edition:

1. Gov. Dayton’s Budget – Tax Fairness or Just Higher Taxes on the Middle Class and Small Businesses?

Governor Dayton released his budget plan last week, and, as he promised over the past two years, the plan includes an income tax increase on so-called “rich” Minnesotans. In addition, the governor proposes to lower the sales tax but expand it to many items not currently taxed.

The governor has indicated that his goal is to stabilize future budgets and “end the fiscal games, accounting gimmicks, payment delays and other financial manipulations of the last 10 years.” The governor’s plan would increase the state’s two-year budget from $35.8 billion to $37.9 billion – a 7.6 percent increase.

The income threshold the Governor uses to define “rich” is $150,000 in taxable income for a single taxpayer or $250,000 in taxable income for married couples. This includes a large number of working single taxpayers and working families in the northwest suburbs. The tax rate would increase a full two percentage points from 7.85 to 9.85 percent.

In addition, the governor’s plan expands the sales tax to a long list of new items while lowering the rate from 6.875 to 5.5 percent. Among the items not currently taxed which would be taxed under the Dayton plan include auto repairs, haircuts, tax preparation, legal services, and dozens more. Among the more controversial items subjected to the sales tax would be clothes priced over $100.

Additionally, so-called “business to business” services would also be taxed. As an example, accounting, legal, marketing, design, architectural and other services provided by one business to another would all fall under the sales tax.  

Tne other tax tucked into the governor’s plan is a .25 percent transit tax for metro area taxpayers. The funds raised from this new tax are slated to be used for light rail and the Metro Transit bus service.

The governor promises a $500 property tax rebate to all homeowners and a 14 percent reduction in the corporate tax rate, in addition to a $640 million increase in education funding. 

Preliminary reports are that Governor Dayton’s fellow Democrats are uneasy with many portions of his tax proposal. The governor’s tax plan will be heard in multiple committees, including the Tax Committee on which I sit. It is expected to be substantially amended as it moves through the legislative process. Stay tuned for more information in the weeks ahead.

2. Visit from Anoka-Hennepin Teachers

I was honored to meet with teachers from the Anoka-Hennepin School District as part of Education Minnesota Day at the Capitol. This session I plan on working to reform the K-12 funding disparities between the Twin Cities and our districts’ schools. All children – regardless of zip code – deserve a quality education that allows them to compete in today’s global economy.

As always, feel free to contact me at any time. I am here to serve the people and priorities of our district.

Have a great week,

Joyce

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