Minnesota House Democrats say they want the state's wealthiest residents to temporarily pay an income tax surcharge to eliminate a funding delay to the state's schools.
The Democrats released a budget outline Tuesday that also includes a permanent income tax increase similar to the one proposed by Gov. Mark Dayton. They are looking to increase taxes by roughly $2.4 billion to restore delayed payments to schools, erase a $627 million budget deficit and spend more on a variety of state programs.
DFL House Speaker Paul Thissen said the plan raises income taxes on top earners to help erase the deficit and raise more money for schools. He said House Democrats want an additional tax hike for people with taxable incomes of $500,000 or more. The increase will be temporary and will expire once the remaining $808 million in shifted payments to schools are restored in two years, he said.
"This is not intended as a means of pitting one group against another," Thissen said. "But we also know that the very wealthiest Minnesotans have been by far the biggest beneficiaries of the economic growth in the past decades while middle class families and the working poor have suffered and stagnated."
By adding a temporary income tax hike to pay back the shift, House Democrats are going beyond the governor's income tax increase. In last year's election, Democrats campaigned on paying back the shift and are now delivering on that promise. They are also committing to spending about $700 million more for early childhood education, K-12 schools and higher education over the next two years. DFL Rep. Paul Marquart, who chairs the House K-12 Finance Committee, said he wants all-day kindergarten to be available to any school district that wants it. He said increased spending for schools is important to create a qualified workforce in the future.
"We have to move the dial, we have to make a difference in every student's life in this state and improve the quality of life of every Minnesotan," Marquart said.
“There's an old saying that there's nothing more permanent than a temporary tax.”GOP House Minority Leader Kurt Daudt
The plan will also increase aid to cities and counties and spend more for direct property tax relief. It would cut Health and Human Services programs by $150 million over the next two years, but DFL leaders did not specify which programs would be cut.
Republicans say the DFL plan spends too much and will hurt the state's economy, and ripped into their DFL counterparts for proposing higher taxes than Dayton did.
"There's an old saying that there's nothing more permanent than a temporary tax," GOP House Minority Leader Kurt Daudt said.
Daudt says the DFL plan to increase income taxes would make Minnesota's income tax rate one of the highest in the nation. He warned the tax hikes will prompt business leaders to relocate.
"Democrats want Minnesota to be number one in higher taxes," Daudt said. "Republicans want Minnesota to be number one in job opportunities."
Republicans do not support any tax increase, Daudt said, but provided no specifics about which programs they would cut to erase the budget deficit. While Republicans have plenty to say about the DFL budget, they do not have the votes to stop it - the Democrats control the House, the Senate and the governor's office. Senate Democrats are scheduled to release their spending targets Wednesday.
DFL Senate Majority Leader Tom Bakk did not offer much support for the temporary income tax, saying he does not like putting Minnesota in the top five in any tax category.
"I'm always cautious about getting us in that top five number," Bakk said. "I don't know where their proposal is going to put them in a ranking nationally, but that would be one of my concerns with going down that road. I suspect that will probably put you in that top five, which is something I'm always cautious about."
Bakk also said Senate Democrats will side with the governor and not accelerate the payback to schools. They say the law now projects the shift will be paid back in full within four years.