Gov. Mark Dayton thinks his tax reform proposals are good for the whole state, but he says they will benefit outstate Minnesota even more than the Twin Cities metro area.
“Middle income taxpayers are going to pay less,” Dayton said in a telephone conference call with outstate media Wednesday.
Dayton said his proposal to increase taxes on the wealthiest 2 percent of Minnesotans will hit only 1 percent of outstate residents.
“I hear so much (from Republicans) about affects on small business owners — that they all have incomes over $250,000 and that’s just not true in general and it’s certainly not true in Greater Minnesota.”
On Tuesday Dayton laid out a budget to close an expected $1.1 billion budget deficit and increase some spending, mostly in education. He calls for changes to the sales tax system that would reduce the tax from 6.875 percent down to 5.5, but would expand it to clothing items over $100 and to services, ranging from legal services to hair cuts.
The plan would also provide up to $400 annual property tax rebates for home and business owners and would cut corporate taxes.
Dayton said the lower but broader sales tax would mean most middle-income Minnesotans would pay about the same in sales taxes as now. But he said reform is needed because it would provide more stable revenue streams during economic ups and downs and because it addresses big shifts in where people spend their money.
In the 1950s, one-third of consumer spending was on services and two-thirds on goods. Those figures are now switched.
“The current (tax) system isn’t designed for the economy we have now.”
While the sales tax burden should be about the same, Minnesotans will get a break on property taxes, Dayton said.
“We’re relying more and more on property taxes and both homeowners and businesses are hurting from that.”