ST. PAUL, Minn. (AP) — A proposal from Minnesota Republicans for a series of income tax cuts drew a rebuke Monday from Democratic Gov. Mark Dayton, who cast it as a giveaway for those with the biggest salaries.
The House GOP plan unveiled over the weekend would lower two of Minnesota’s three tax rates by a fraction of a percent each, phasing the reductions in over three years. Because those in the top tax bracket pay a portion of their taxes based on the lower two rates, they would see tax cuts, too.
A Revenue Department analysis suggests the average filer would see a tax cut of $64 in the first year. But those with incomes above $100,000 would see burdens fall by $100 to $200. That’s consistent with a separate analysis by House researchers.
“It bothers me the Republicans would present this as a tax cut targeted for lower and middle-income families when the facts are the opposite that the greatest benefit goes to upper-income Minnesota families,” Dayton said. “Once again they just have shown their values, their priorities are to benefit the richest Minnesotans at the expense of the rest of Minnesota.”
He also questioned whether the tax cut was feasible given the state’s $5 billion projected deficit. Every tax dollar cut must be offset by additional state spending cuts.
The tax cut is part of a broader bill that would also reduce commercial and industrial property taxes, slice the amount of tax credits available to people in rental housing and pare back state aid to some cities. The bill is headed for a committee vote by the end of the week.
Minnesota reaps about $8 billion annually in income taxes after refunds are paid out. The proposed income tax cuts would add up to $221 million over the next two years and climb to $786 million in the two years after that.
Under the House plan, the bottom two rates would fall in stages. The lowest rate would go from 5.35 percent now to 4.75 percent by 2014. The middle rate would drop from a current 7.05 percent to 6.75 percent.
Depending on their income, taxpayers could see a first-year break of as little as $3 to as much as $206, according to the Revenue Department analysis. Once fully implemented, the range of taxpayer savings falls between $11 and $481.
House Majority Leader Matt Dean, R-Dellwood, didn’t back away from the GOP description of the tax cut.
“Clearly the intent is to help folks with lower and middle income,” Dean said. “If it also associatedly helps (upper-income filers) I don’t know that I would criticize the plan because of that.”
Minnesota’s top bracket — 7.85 percent — doesn’t kick in until taxable income reaches about $75,000 for single filers and about $132,000 for married couples. The lower rates apply on income below those thresholds.
As part of his budget plan, Dayton has proposed adding a new fourth bracket of 10.95 percent for people toward the top of the income ladder. Republican leaders have ruled out increases to the income tax.
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