Democratic House proposes higher taxes on the wealthy and on alcohol

by T.W. Budig
ECM Capitol reporter

House Democrats look to the wealthy, sin taxes and corporations to raise $2.6 billion in new taxes to help finance their legislative agenda.

“It’s for two years,” House Speaker Paul Thissen, DFL-Minneapolis, said of a proposed $1.2 billion surcharge on the wealthy.

“And it’s for a good purpose,” he said of paying back the remaining $854 million education shift with the proceeds of that surcharge.

House Speaker Paul Thissen, DFL-Minneapolis. (Photo by T.W. Budig)

House Speaker Paul Thissen, DFL-Minneapolis. (Photo by T.W. Budig)

But Thissen also said the four percent surcharge, which would come on top of a proposed 8.49 fourth-tier income tax rate, would leave Minnesota with one of the top income tax rates in the country.

But House Democrats are not squeamish.

“We believe we have strong (Democratic) support for this bill,” House Majority Leader Erin Murphy, DFL-St. Paul, said.

In addition to the income tax increases — the surcharge affecting about 13,000 taxpayers, the fourth-tier increase affecting some 27,300, according to House Research — House Democrats propose raising $434 million through tax increases on cigarettes and tobacco.

They look to increasing the tax on a pack of cigarettes by $1.60.

Democratic Gov. Mark Dayton has proposed a 94-cent-per-pack increase.

House Democrats also want   to raise $355 million through alcohol tax increases.

Although the tax isn’t collected every time a bartender draws a beer, it translates into about seven cent increase per glass, Thissen said.

For a bottle of wine, it’s 47 cents, he said.

Tobacco and alcohol sales affect state coffers through increased health care costs, public safety costs and other costs, Thissen said.

Beyond paying back the education shift, House Democrats slate $250 million in new revenue toward property tax relief.

Under their homestead credit reform proposal, about 315,000 tax filers would see bigger property tax refunds — about $212 on average, according to House Research.

About 116,000 more homeowners would become eligible for refunds.

Also, through a notification program, about 100,000 homeowners believed to be eligible for property tax relief, but not claiming it, will claim it, officials believe.

House Democrats also propose increased renters’ property tax refunds.

Through proposed changes to income thresholds, about 66,000 renters would see bigger refunds with perhaps an additional 10,000 becoming eligible for one.

Democrats say veterans’ hiring credits, capital equipment sales tax exemptions and other parts of their tax bill are beneficial.

House Republicans were not silent about the Democratic tax proposals,

“Why would you start a business in Minnesota knowing that if you work hard and are successful, your state government will confiscate more of your money with some of the highest tax rates in the nation?” asked Rep. Greg Davids, R-Preston, House Republican Tax Committee lead, in a statement.

“This proposal would force massive job-killing tax increases on our business owners, and devastating regressive tax hikes on the poorest of the poor,” he said.

But Thissen argued the DFL tax proposal does not target “Ma and Pa” neighborhood businesses.

Only about 3.3 percent of tax filers, or about 12,000 returns, with “pass through” income from so-called S corporations, would be affected by the fourth-tier and surcharge, according to House Research.

The fourth-tier 8.49 income tax rate would apply to taxable income above $400,000 for married joint filers, $226,200 for single filers, $340,700 head of household.

The four percent surcharge would apply to taxable incomes over $500,000 or $250,000 for married separate files.

According to House Research, the 12.49 percent top rate, the fourth-tier plus the surcharge, would give Minnesota the third highest income rate for two years.

California, at 13.3 percent, and New York, at 12.696 percent, would rank ahead.

Other items in the House Democratic tax bill includes a tax provision for the Mall of America, and a Mayo Destination Medical Center provisions providing for local bonding, taxing, and other financing authority to the City of Rochester, among other provisions.

It sets the maximum general state aid for the center at $338 million, with no more than 30 million a year.

The bill includes an vehicle rental tax increase, a 10 percent sports memorabilia tax and expansion of the sales tax to stadium boxes and suites.

The latter provisions were included to bolster the state’s financing of the Viking stadium.

Tim Budig can be reached at tim.budig@ecm-inc.com.

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