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Dayton Announces Tax Increases, Decreases to Fix Budget

Posted at: 01/22/2013 6:56 PM
By: Brianna Long

(ABC 6 NEWS) -- They are changes that would impact every single person in Minnesota. Governor Dayton's plan to fix the state's budget means changes across the board. All of those changes are to fix a billion dollar budget shortfall.     

Taxes, both increases and decreases, are how governor Dayton plans to dig out of this billion dollar deficit. Sales tax reform is a big part of that plan.

It's something Minnesotans enjoy when hitting their local shopping mall. No sales tax on clothing. But starting next year, that could change.

"My sales tax reform would broaden its base." said Governor Mark Dayton. He wants to lower the sales tax rate in Minnesota from 6.8 percent to 5.5 percent.

"That would be a rate reduction of 20%, the largest in Minnesota history, and it would drop us from the seventh highest to 27th among the states," said Dayton.

In addition to lowering the tax rate, the proposal would also apply taxes to more items.

"The sales tax would be applied to purchases of many goods and services, which are now exempt," said Dayton.

Most Notably, clothing purchases of more than $100 would be taxed. Also, service like auto repairs, barbers, and newspaper subscriptions. Dayton's also calling on an increase to cigarettes; nearly a dollar per pack increase.

Sales tax isn't alone. There are also changes to income taxes, and property taxes.

"In my budget, I am asking Minnesota's highest earners to pay more of their fair share," said Dayton. 

Married couples making more than $250,000 of taxable income, or individuals making more than $150,000 in taxable income would see a 2% increase. But everyone, regardless of income, will get a refund from the state on the first $500 paid in property taxes per year.

"The result of these changes in the income tax, sales tax, and property tax, would be to reduce the total state and local taxes paid by most Minnesotans," said Dayton.

The budget is not yet finalized. It still has to go through the House and Senate for approval. However, because the majority of both chambers is Democratic, there isn't expected to be much opposition.

To learn more details about the Governor's proposal, click here.