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A narrow majority of Minnesotans favors Gov. Mark Dayton’s plan to raise taxes on the state’s top earners, and nearly as many say they would be willing to pay sales tax for the first time on clothing items above $100, a new Star Tribune Minnesota Poll has found.
But they are expressing strong resistance to another pillar of Dayton’s tax overhaul: Extending the sales tax to services purchased by businesses.
Fully 54 percent of Minnesotans favor higher taxes on net incomes above $150,000 for individuals and $250,000 for couples. Just under half — 49 percent — also favor the clothing tax. But Minnesotans appear to be drawing a line at extending the sales tax to business services, with 63 percent opposed and 28 percent in favor.
The poll is the first formal gauge of how divided Minnesotans appear to be over the governor’s broad tax plan, which is at the core of his agenda for the state this year.
Informed of the results, Dayton said, “It doesn’t surprise me that people are against any tax increase. The question is, What do they get in return?”
Dayton said his proposals would gain popularity once Minnesotans know that the revenue generated would help provide property tax relief to homeowners and more funding for public schools.
However, Renville livestock farmer Duane Mulder, 65, said he’s worried. “It would definitely bite into my businesses, which is already experiencing losses,” he said. “And once they have a tax, they will just keep raising it.”
‘The wrong direction’
Republican leaders say the plan is too much for a recession-rattled economy. “Minnesotans understand that these tax increases are going to hit directly on middle-class Minnesotans and job creators,” said House Minority Leader Kurt Daudt, R-Crown. “This is the wrong direction in a fragile economic recovery.”
Daudt and other critics point to last week’s economic forecast, showing the state’s projected deficit shrinking by 43 percent. That news, they contend, makes the governor’s plan for multibillion-dollar tax increases unnecessary.
Minnesotans also are split on Dayton’s proposal to tax personal services, such as haircuts and auto repairs. About 48 percent oppose the tax, while 45 percent favor it. The poll of 800 Minnesotans, conducted Feb. 25-27, has a margin of sampling error of plus or minus 3.5 percentage points.
Earlier this year, Dayton proposed the most comprehensive overhaul of the state tax code in decades. In addition to greater education spending and property tax relief, Dayton would dramatically expand the sales tax but lower the overall rate to 5.5 percent from 6.8 percent.
Dayton said his goal is not simply to raise revenue, but to modernize an antiquated tax system and finally break a long, damaging cycle of budget deficits and service cuts.
Dayton said that after years of spending cuts, “people realize that’s an extremely unbalanced approach to the future of Minnesota.” He also said that after a decade with no income or sales tax increases, Minnesotans are ready for a “fairer” tax system and a return to greater spending on key issues, such as education. It’s an argument with sizable support across the state, the poll found.
Most popular idea
The governor’s proposal to raise taxes on high earners is most popular in outstate Minnesota, where 59 percent are supportive and 34 percent are opposed. Fifty-seven percent of Hennepin and Ramsey county voters approve of the idea, while 41 percent are opposed.
Support for the proposal diminishes in the Twin Cities suburbs, where voters are split at 45 percent for and against.
Support for the tax on high earners increases with older Minnesotans. Among voters 50 to 64 years old, 59 percent like idea. Republican voters are the only bloc that resoundingly reject it. Fifty-nine percent of Republicans oppose the higher income tax, which was a hallmark of Dayton’s gubernatorial campaign.
Of all the proposals in Dayton’s plan, Minnesota voters most strongly rejected his expansion of the tax on business services. Dayton is relying on more than $2 billion in new revenue from business services to pay for many of his initiatives, including a $500 property tax rebate for each homeowner.
Not a single segment of those polled approved of the new business tax. Opposition was unanimous in all corners of the state, regardless of age, sex, income or party affiliation.
Only 36 percent of Democrats support the idea, the strongest of any party affiliation. Only 21 percent of independents approve of the new tax, and 72 percent reject it, by far the highest opposition of any party.
Other than Democrats, women provide the strongest source of support for the idea, though it is anemic. Just 34 percent of women like the plan; 56 percent remain opposed.
Raise liquor tax?
The poll found some of the strongest support for a proposal that has been introduced in the House, but is not part of the governor’s plan — an increase in the liquor tax. More than 60 percent support it, with just 7 percent undecided.
Dayton remains cool to a liquor tax increase, which has not been raised in a generation. He argues it would fall disproportionately on low-income Minnesotans. Dayton is pushing for a steep tobacco tax hike, which health experts say has been proved to discourage smoking.
The state’s powerful liquor lobby has successfully fought alcohol tax hikes, but nearly every cross-section of Minnesota voters supports the idea over other types of tax increases.
Support is highest among Minnesotans earning less than $50,000, with 67 percent in favor. Only 27 percent in that income bracket opposes a higher liquor tax. More than half of those earning above $50,000 also support raising the liquor tax, as did 79 percent of all women surveyed.
“I think that is a user tax that is palatable, like a cigarette tax or a gasoline tax,” said Marcia Eide, a social worker from Minneapolis. “If it could decrease other taxes, or hold them steady, that’s a fair trade. And it’s something I have some control over.”
Dayton plans to release modifications to his budget proposal in about two weeks.
Baird Helgeson • 651-925-5044