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Reality Check: Gov. Dayton’s $4.1B In Tax Hikes

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(credit: CBS) Pat Kessler
Pat Kessler knows Minnesota politics. He's been on the beat long...
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By Pat Kessler, WCCO-TV

ST. PAUL (WCCO) — Gov. Mark Dayton appealed to Minnesota’s richest citizens Tuesday to spare the poor and bear the brunt of a $6.2 billion budget deficit.

Dayton is proposing $4.1 billion in tax hikes, including creating a new fourth-tier income tax rate, raising property taxes on homes valued above $1 million and imposing a 3 percent surtax on high incomes.

Dayton also cuts 7,200 low-income adults from state health programs, raises taxes on health care providers and cuts payments to nursing homes.

The tax hike on the highest income Minnesotans drew the most attention, and harsh words, at the Capitol.

However, Dayton says most Minnesotans won’t get any tax hike at all. Is that true?

He’s proposing the highest income tax in the nation, and it’s not even close.

“This is a very tough budget for very hard economic times,” he said as he unveiled the controversial budget plan.

IN FACT, right now, Minnesota’s income tax rate on wealthy Minnesotans (7.85 percent) ranks sixth-highest in the United States. It trails only Vermont (8.95 percent), Iowa (8.98 percent), California (9.55 percent), New Jersey (10.75 percent) and Hawaii (11.0 percent).

Under Dayton’s plan, the tax rate would rise to 10.95 percent and impose a 3-year, 3 percent temporary surcharge on incomes above $500,000. That would make Minnesota’s 13.95 percent income tax rate on the wealthy the highest in America.

But that’s NOT THE WHOLE STORY. Only 5 percent of Minnesotans would pay the highest income tax rate. Ninety-five percent of Minnesotans would not see a tax hike.

Here’s what you NEED TO KNOW. Almost no one pays income tax on their entire salary. The tax is on income after deductions.

For example, a married couple filing jointly would have to earn $200,000 a year to be taxed at $150,000. Their tax bill would go up about $139.

It’s the higher end that hurts: $1 million earners would see their tax bill increase $37,000 above what it is now. Read more about that here from the Department Of Revenue.

Although Dayton’s tax hike proposal would affect only about 5 percent of Minnesota taxpayers, the top earners in Minnesota pay the most in total taxes.

The 2010 Department of Revenue Tax Incidence Study found the top 10 percent of Minnesota earners, which is about 245,000 households, pay 43 percent of all income taxes.

That’s Reality Check.

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