ST. PAUL — Gov. Mark Dayton on Thursday set up the clear-cut tax debate his aides say he's always craved, demanding that Minnesota's best-off residents pay higher income taxes to boost spending on education and other services.
Dayton released an updated budget plan that leans heavily on a new income tax rate levied on the top 2 percent of annual earners, extracting $1.1 billion in the next two years from an estimated 54,000 filers. The money would help erase a $627 million budget shortfall, bolster preschool through college education and stock loan and grant funds for business expansions.
In all, the Democratic governor is seeking more than $1.8 billion in previously proposed new taxes, including a higher cigarette tax and extra burdens on Minnesota companies that can now shield profits they make overseas.
"Just saying no to tax increases is not a budget plan and is not responsible," Dayton said.
The top-tier income tax was a centerpiece of Dayton's 2010 run for governor, but he wound up backing away from it to end a budget stalemate with Republicans in 2011. Now with Democrats in charge of the Legislature, Dayton stands to get his wish.
Dayton's two-year budget plan unveiled in January had also included a sales tax expansion that would have yielded more money that he was planning to use to compensate for property tax rebates and other tax code revisions. Dayton began rewriting the budget after a state economic forecast trimmed Minnesota's projected deficit by more than 40 percent, and he officially ditched the sales tax plan Thursday.
Dayton left his income tax plan intact. Under it, taxable income above $250,000 for couples and $150,000 for single filers would be assessed at a 9.85 percent rate, much more than the 7.85 percent current top rate. Officials say that translates, for instance, into gross incomes in excess of $306,000 for a married couple with two children given deductions. Some businesses that file their returns through the personal income tax would be affected.