Governor Dayton promised tax reform and spending cuts. He promised a simpler tax code, and no more budget gimmicks. He promised to quickly repay the K-12 shift. And he promised that middle class and working class Minnesotans would be held harmless.
On Tuesday, Governor Dayton broke those promises, unveiling a budget chock-full of tax increases (under the guise of "tax reform") to support an unprecedented and unsustainable level of spending. Among the budget "highlights":
- Creates top-tier income tax rate of 9.85%, which is a 25% increase over the previous top marginal rate. And despite all the talk of taxing "millionaires and billionaires", Dayton’s tax would apply to individuals with taxable income over $150,000 and couples over $250,000.
- Raises the cigarette tax by 94 cents, which is a 59% hike, bringing the total tax per pack to $2.52. While running for governor, Mark Dayton said he opposed increasing the cigarette tax because "that’s money out of the pockets of working people and poorer people, and that means kids don’t have as much to eat or don’t have the same quality of food."
- Imposes a ¼-cent metro-wide sales tax to pay for maintenance and expansion of the transit system.
- Sets the state sales tax rate at 5.5%, but extends it clothing over $100 and countless services, including car repairs, legal services, and more. Extending the sales tax to business-to-business services, in particular, is a guaranteed job killer for small businesses in Minnesota. Notably, Dayton would exempt medical and burial services, meaning the only way to escape Dayton’s taxes are to get sick or die.
- Delays repayment of the "K-12 shift" until 2017. To summarize, Dayton proposed and approved a K-12 shift in the state’s previous budget, then blamed the legislature for the idea. Now, despite promising "no more budgeting gimmicks", Dayton delays repayment of the shift for several years.
- Taxes digital downloads and online purchases
- $225 million in "spending reductions" compared to well over $2 billion in tax hikes
In all, Governor Dayton’s budget would spend more than $38 billion, making it by far the largest budget in state history, and an increase of nearly 8 percent in state spending. Tellingly, neither Speaker of the House Paul Thissen nor Senate Majority Leader Tom Bakk would commit to supporting any major component of Dayton’s tax-and-spending plan. Unfortunately, that may be the only good news for taxpayers about the governor’s budget. Well, unless you're from the State of Wisconsin.
Cross-posted from Freedom Foundation of Minnesota's Bulletin.