Tax committees in the Minnesota House and Senate began dissecting Governor Dayton's budget proposal, which relies mostly on new revenue to erase a projected $6.2 billion deficit.
Assistant Commissioner Matt Massman of the Department of Revenue appeared before both panels to present detailed overviews of the revenue-raising provisions in Democratic governor's plan. Much of the focus was on the governor's proposal for a fourth income tax rate of 10.95 percent, which would be an increase from the current top rate of 7.85 percent. The new higher tax would kick in on single filers with annual taxable income of $85,000 or more and on couples with taxable income of $150,000 or more a year. The governor's proposal also calls for a temporary 3 percent surtax on Minnesotans earning more than $500,000 a year.
Massman said the proposal reflects Dayton's interest in a more progressive overall tax system. But Senate Taxes Committee Chair Julianne Ortman, R-Chanhassen, took issue with the governor's approach.
"The governor has said that this would be a tax on the wealthy," Ortman said. "I wouldn't include folks at $85,000, or $150,000 joint income, as wealthy."
Ortman and other Republican also raised concerns about the potential impact of tax increases on business owners, who they predicted would leave the state to avoid higher taxes.
Democrats suggested the proposed tax increases could yield economic benefits. Senate Minority Leader Tom Bakk, DFL-Cook, said some small business owners might invest more into their businesses to avoid the individual tax increases.
"It could actually stimulate more reinvestment in business, to avoid the tax liability," Bakk said.
House and Senate tax committees will resume discussions of the governor's proposal tomorrow. Both panels are expected to begin taking public testimony next week from supporters and opponents on the proposed tax increases.