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Dayton eyes major changes in state tax system

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Big changes could be on the horizon for Minnesota's tax system. The Star Tribune reports Gov. Mark Dayton is pursuing the biggest set of changes since the 1980's.

Emboldened by the new DFL control of the Legislature, the governor reportedly wants to ease pressure on property taxpayers in part by eliminating exemptions to state corporate and sales taxes. Minnesota has some of the country's highest tax rates but, through deductions and exemptions, the state forgoes an estimated $11 billion in revenue every two years. But changing the tax system at a time when the state faces another big budget deficit and uncertainties about how the federal government will resolve budget and deficit questions could put Dayton on a fiscal tightrope.

For many homeowners, this year's property tax bills are actually a relief from those of the recent past. In Minneapolis and St. Paul owners of median-valued homes are looking at reductions of more than five percent compared to last year. Owners of businesses and apartment buildings, however, face increases. The same pattern is at work in Duluth, where landlords and merchants are dismayed by the hikes.

The changes the Dayton administration is working on are separate from tax hikes proposed by a transportation task force last week.

A key component in the budget that the Governor proposes to the Legislature will arrive this week in the form of a new state economic forecast. But the state economist says uncertainty about how the federal government will deal with the fiscal cliff makes that forecast more speculative than usual.

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