Minnesota Senate Democrats want to raise $1.8 billion in new taxes to balance the budget, lower property taxes and boost money for economic development.
The proposal released Tuesday ditches the governor's proposal to create a new top income tax tier for the state's highest earners and instead raises taxes for a wider income spectrum. Married filers with a taxable income than about $142,000 a year would pay a higher rate.
The Senate proposal also calls for a 94 cent-per-pack hike in tobacco taxes and a first-ever tax on clothing, but lowering the overall sales tax rate to 6 percent from 6.875 percent.
Low-income Minnesotans would get a credit of up to $60 to offset the new clothing tax. A Minnesota family that spends less than $1,000 a year on clothing would come out ahead, under the new program.
The proposal is a dramatic departure from the House plan in several key areas. The Senate ignored the House plan to raise the alcohol tax, as much as $4 for a case of beer. It also leaves out the much-debated House plan for a temporary income tax surcharge on those who make more than $500,000 a year.
The Senate proposal includes tens of millions of dollars in new economic development aid for companies like 3M in Maplewood and Mayo Clinic in Rochester.
"Rochester needs to keep up with Mayo's growth," said Senate Taxes Chairman Rod Skoe, DFL-Clearbrook. "We think this is a wise use of state resources."
Republicans have argued against any tax hikes, saying the state's economy is rebounding on its own and the new taxes would be a stifling burden for job creators. The state faces a $627 million deficit in the next two years, but forecasters predict a small surplus in later years.
“Once again Minnesotans have seen that St. Paul Democrats want to balance the budget on the backs of all Minnesotans,” said Ben Golnik, head of the Minnesota Jobs Coalition, an independent group that formed to take on Democrats who control the Legislature and the governor's office. “Our state has a manageable $627 million deficit, leaving Democrats with no justification to raise taxes on certain clothing purchases."
Skoe said the proposal honors their desire to make the tax system more fair, makes targeted economic development investments and lowers property taxes for nearly all Minnesotans.
While the House favored direct property tax rebates, the Senate would do it by taking on a larger share of education funding and boosting aid to local governments.
The Senate plan also includes a new wholesale tax on sports memorabilia, like jerseys and other goods.
The money could be used to help pay the state's share of the new Minnesota Viking stadium.
Skoe said the Senate plan would slice off a small portion of that new memorabilia tax, about 5 percent, for youth sports activities around the state.