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Dayton outlines $500 property tax rebate, sales tax cut

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As expected, Gov. Mark Dayton as part of his much-anticipated state budget proposal for the next two years is calling for higher income taxes on workers who make more than $150,000 a year.

In all, Dayton proposed $2.1 billion more in state taxes under sweeping budget and tax proposals unveiled on Tuesday, the Associated Press reported.

But Dayton says 98 percent of Minnesotans would not pay more in taxes under his proposals.

Dayton wants to lower the sales tax rate from 6.875 percent to 5.5 percent, but he proposes putting sales taxes on more items, including services not currently taxed, like haircuts. He advocates a new sales tax on clothing items that cost more than $100. Dayton wants to raise cigarette taxes by 94 cents per pack.

Dayton also proposes giving homeowners a rebate for the first $500 of property tax they pay this year, the Star Tribune reported.

And he aims to trim the corporate tax rate to 8.4 percent from 9.8 percent, the newspaper reported.

MPR has a bullet-point list of Dayton's budget and tax highlights.

Dayton predicted it would be "very difficult" to achieve significant tax reform this session, even though Democrats control both chambers of the Legislature.

The changes Dayton proposed Tuesday could amount to the state's biggest tax overhaul in decades. But only if they pass the Legislature. And the Associated Press reminds us history shows consensus is elusive when it comes to the question of how to reform taxes.

MPR notes that Dayton's proposals amount to a gamble on his political future.

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The Minnesota Senate joined the House in approving a bill that would cut taxes by more than $40 million this year and by more than $140 million in the next budget cycle. But Governor Mark Dayton calls it fiscally irresponsible because it would take money from the budget reserve and would add to a deficit in the next biennium.