TAX CUTS: Governor's plan for Minnesota budget surplus - KMSP-TV

TAX CUTS: Governor's plan for Minnesota budget surplus

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ST. PAUL, Minn. (KMSP) -

Minnesota Gov. Mark Dayton is proposing $616 million in tax cuts for married couples and working families in light of the state's projected $1.2 billion budget surplus.

The governor's supplemental budget and tax cut plan come on the same day the Minnesota House voted to pass a $503-million tax cut plan of its own -- many aspects of which mirror Dayton's proposals.

Dayton wants to keep $455 million for budget reserves, warning "this cannot be a free for all" in spending the surplus however the Legislature would like.

TAX CUTS

Married couples: More than 650,000 married couples would save an average $115 per year under the governor's plan to eliminate the "marriage penalty."

Working families: 13,000 more middle class families would qualify for the Working Family Tax Credit, and 40,000 would receive an increased credit. These families would save an average $334.

Day care: By expanding tax credits for child care, the number of families benefiting would increase from 36,000 to 170,000. The average tax benefit would increase $430 per year.

Students: Provide 285,000 recent college graduates up to $190 per year by deducting their student loan interest. Another 40,000 current college students and parents would receive a tuition deduction of $140 per year, on average.

Small businesses: Ability to offer employees tax-free tuition and adoption assistance, and simplify small business taxes by eliminating requirements to maintain separate records for federal taxes.

REPEAL BUSINESS TAXES

Gov. Dayton is proposing a repeal of the following taxes:

- Business-to-business warehouse tax
- Telecommunications equipment tax
- Commercial equipment repair tax

ANGEL INVESTMENTS

Proposed $15 million for an Angel Investor Tax Credit to support start-up businesses.

FULL STATEMENT ON SUPPLEMENTAL BUDGET

On Thursday afternoon, Gov. Mark Dayton issued a statement about the proposed tax cuts that can be read in full below:

"The most recent State Budget Forecast projected surpluses of $1.233 billion for the current biennium and $2.599 billion for the next one. This is the first February Forecast in seven years to project surpluses for both the current biennium and the next one. This is good news for Minnesota!

Some politicians will argue over who deserves what credit for these exceptional improvements. I believe the credit belongs principally to the people of Minnesota. To our businessmen and women, who have added over 133,000 jobs during the past three years. To their hard-working, productive employees, who made those new investments successful. And to the teachers, health care providers, law enforcement personnel, and state and local government employees, who make Minnesota a such great place in which to live, work, and raise a family.

Actions taken at the State Capitol have also aided our state's economic recovery. We balanced the State Budget even while repaying all of the $2.8 billion borrowed from our schools. We raised state income taxes on only our very wealthiest citizens, the top 2 percent. We used part of that revenue to provide property tax relief, which has halted a decade of drastic increases. We invested most of the rest in better education. Early childhood education, all-day kindergarten, per-pupil aid increases, tuition freezes at MnSCU and U of M campuses will all contribute to a better Minnesota for decades to come.

After enduring years of bad economic news and of Minnesota's economy performing below the national average, it is very encouraging not only that our state's financial conditions are now improving, but also that the pace of our state's economic recovery has been one of the nation's best. In 2012, Minnesota ranked 5th best among the 50 states in the growth of our Gross Domestic Product (State GDP). More recently, the Gallup Job Index rated Minnesota the 5th best state in its 2013 "Job Index Rankings."

Nonetheless, we must remember that these are forecasted surpluses. In this global economy, events around the world could drastically alter our nation's economic outlook, and thus Minnesota's. By example, the 2007 State Budget Forecast projected an operating surplus of $2.8 billion for the next (FY10/11) biennium. The next year's Forecast, in February 2008, projected a deficit of almost $1.1 billion for that same biennium.

Therefore, I believe that our priorities for the current surplus should be:

#1. Middle-class and Business Tax Cuts;

#2. Increasing the State's Budgeted Reserve;

#3. Essential Additional Expenditures.

To accomplish these goals, I propose to use one-half of the projected $1.233 billion surplus, or $616 million, for middle-income and business tax cuts. I would put the other half, $617 million, into the Budget Reserve, with the understanding that some of it could be expended in this legislative session for absolutely essential needs, such as the $20 million for emergency propane purchases approved unanimously last week by both the House and Senate.

I propose to limit the additional spending in this biennium to $162 million. I regret that this limit would leave out many important needs. However, this is not meant to be a budget session. I believe that we must maintain tight discipline over additional expenditures in non-budget years.

If my recommendations were followed, the Reserve would be increased by $455 million at the session's end, which would increase it to $1.116 billion. The size of the Reserve has not been increased since 2001. Thus, it continues to shrink as a percentage of the total State Budget. As the earlier example from FY07/08 showed, even a Reserve of this amount would not prevent the need for significant budget adjustments in another serious recession. It would cushion the blow, however."

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