Minnesota governor proposes tax increases on wealthy

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http://www.reuters.com/article/2011/02/15/us-minnesota-budget-idUSTRE71E6FL20110215

(Reuters) - Minnesota Governor Mark Dayton on Tuesday proposed permanent and temporary income tax increases on the state's wealthiest residents to help close an estimated $6.2 billion gap in its two-year budget.

The new Democratic governor aimed more than half of $4.1 billion of state revenue increases at the wealthiest 5 percent of Minnesotans as part of his nearly $37.1 billion of proposed general fund spending for fiscal years 2012 and 2013.

In a "state of the state" address last week, Dayton asked for bipartisan support from the Republican-controlled legislature to resolve Minnesota's fiscal crisis without "savaging essential public services."

Dayton narrowly won election on a platform that included plans to raise taxes on the wealthiest state residents. Republican leaders have said there is no support among Republicans for the governor's income tax proposals.

A former U.S. senator and great-grandson of the founder of the Dayton's department store chain, Dayton loaned his campaign nearly $4 million and spent more than $5.3 million over the last two years, according to campaign finance records.

Dayton's budget suggests raising $1.89 billion from a new top tier income tax, $918 million from a temporary 3 percent surcharge on incomes above $500,000 and $84 million from a state property tax on homes valued at more than $1 million.

The new 10.95 percent top tier income tax rate applies to individuals making more than $130,000 per year and joint filers making more than $150,000 a year. The total tax impact on residents is reduced by federal deductions.

The governor also proposes to close a "snowbird" loophole that allows individuals who live outside of Minnesota for part of the year to avoid state taxes. The budget also proposes to close loopholes on corporate income taxes.

Elementary and secondary education and health and human services make up about 70 percent of the proposed budget. Aid to local governments was unchanged and makes up more than 9 percent of the proposed spending.

(Reporting by David Bailey)