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Governor Dayton Unveils Minnesota Budget Proposal - Valley News Live - KVLY/KXJB - Fargo/Grand Forks

Governor Dayton Unveils Minnesota Budget Proposal

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Minnesota Governor Mark Dayton hopes to raise $2.1 billion more in state taxes, partly by subjecting more items to the sales tax in a tradeoff for a lowered rate. 

The Democrat's proposal Tuesday covers the waterfront in taxes.

It would hike the amount owed on income above $150,000 for single filers, subject high-end clothing to the sales tax and raise cigarette taxes by 94 cents per pack.

But he also wants to cut the corporate tax and provide property tax rebates of up to $500.

It's all contained in a two-year plan that would fuel about $38 billion in state spending. It includes a promise to schools to add $52 more in aid per student.

Dayton's plan is the starting point in a debate likely to reach into May.

SALES TAXES

Dayton is proposing Minnesotans pay a lower overall sales tax rate but that it should be applied to more goods and services, including clothes over $100.

The budget blueprint Dayton is unveiling Tuesday proposes big changes to the state's sales tax.

It would apply the sales tax to some services now exempt, but would continue to exempt food and medical services along with clothing purchases under $100.

More things would be subject to the state sales tax, but its overall rate would drop from the current 6.875 percent down to 5.5 percent under Dayton's proposal.

That's a 20-percent decrease, which Dayton's office says is the largest in state history.

They say Minnesota would go from the 7th highest sales tax rate to the 27th highest among U.S. states.

EDUCATION FUNDING

Dayton wants the state to spend an extra $52 per public school student. 

That jump is part of a more than $600 million increase in education spending that Dayton is seeking for the state's next two-year budget, which he outlined Tuesday morning. 

Dayton is also pushing for more money for all-day kindergarten programs, early education scholarships and for the state's public universities and colleges. 

The governor says his education investments are necessary to improve Minnesota and its economy. His plan for more education spending accounts for almost two-thirds of his proposed state spending increases. 

Dayton has made funding K-12 education a top priority for his first term. He's pledged to increase funding every year in office.

INCOME TAXES

Gov. Mark Dayton is calling for an income tax increase on Minnesota's wealthiest citizens.

Dayton's budget proposal Tuesday carries out what's been one a signature goal of his governorship. He would create a new 4th tier income tax bracket of 9.85 percent, which would apply to taxable income over $250,000 for married joint filers and single filers who earn above $150,000.

Dayton stresses the new rate would apply to only 2 percent of Minnesota taxpayers. His administration says it would raise $1.1 billion in the next budget cycle.

The proposed income tax hike on high earners is part of a broader tax overhaul that would lower the state's sales tax rate but apply it to more things, and provide a rebate to property taxpayers in 2014.

PROPERTY TAX REBATE

Gov. Mark Dayton is proposing a $500 property tax rebate for every Minnesota homeowner.

Dayton says Tuesday as he unveils a budget proposal that Minnesota government relies too much on funding from property taxes. He says it's the state's least fair tax because it must be paid regardless of homeowner's income.

His plan would give every homeowner, including farmers, a rebate on the first $500 of their 2013 property bill and every year going forward. It also restores full funding of a property tax credit for renters.

The proposed sales tax rebate is a piece of a larger overhaul of state taxes that includes an income tax increase on top earners, and a lowering of the state sales tax while widening it to include more purchases.

If you live in Clay County, you will see a 15 percent reduction in these taxes. An average family with a home of $160,000 will save about $522.

SMOKING TAX

Gov. Mark Dayton is proposing a 94-cent increase in the state's tax on a pack of cigarettes.

Dayton is releasing his state budget blueprint on Tuesday. It includes a spending increases, and changes to the state tax system including an upper-income tax hike, a property tax rebate and state sales adjustments .

Dayton says he has been reluctant to raise the cigarette tax because it's among the most regressive taxes. That means it falls harder on people with low incomes. But Dayton says he thinks that is ultimately outweighed by the fact that increasing cigarette taxes has been shown to reduce the number of people who smoke.

The state's current cigarette tax rate is $1.58 a pack. Dayton says his proposed increase would make Minnesota's per-pack tax equal to Wisconsin's.

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