MANKATO — Minnesota Gov. Mark Dayton on Tuesday proposed $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 increases the amount owed on income above $150,000 for single filers, subjects high-end clothing to the sales tax and raises 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.
"I expect that significant tax reform will be very difficult to achieve in this legislative session," Dayton said in prepared remarks. "My proposal starts with two strikes against it."
Dayton said his plan would drop Minnesota's sales tax rate from 6.875 percent to 5.5 percent — a cut that would bring the rate to a level not seen since 1981. But people would pay for a range of services that aren't taxed now and clothing above $100 would be taxed, marking the first time Minnesota applied its sales tax to apparel.
It's all contained in a two-year plan that would fuel about $38 billion in state spending, which is about $1 billion more than the state was due to shell out. Included is a promise to schools of $52 more per student.
Dayton's plan is the starting point in a debate likely to reach into May. At a minimum, lawmakers must plug a $1.1 billion projected deficit.
With fellow Democrats now in charge of the Legislature, Dayton's plan carries tremendous weight and a high likelihood that much of it will be enacted.
Lawmakers must approve a budget by July 1 to avoid service interruptions. Barring unexpectedly deep spending cuts, the state is expected to spend more than the $35.2 billion that it was on course to shell out in the current two-year budget.
Unlike in 2011, when a newly elected Dayton had just a couple of months to craft his recommendations, the governor has spent much of last year examining options.
Overview hearings on Dayton's budget will begin Wednesday. But lawmakers are expected to wait until March or later to begin votes on the recommendations or their substitute. In late February they will get an updated economic forecast, which will determine whether the estimated deficit they must erase is larger or smaller.
"We have the luxury of getting to see the reaction across Minnesota" before acting, said House Tax Committee Chairwoman Ann Lenczewski, DFL-Bloomington.
The budget address marks Dayton's return to public view after spending the past month recuperating from spinal surgery.