House DFLers raise $2.6 billion in new revenue in tax bill

House Democrats are proposing to raise about $2.6 billion in new taxes over the next two years to help balance a $627 million budget hole and pay back debt owed to the state’s school districts. Their school shift payback plan is based on a temporary top-bracket income tax surcharge that would give Minnesota the third highest rate in the U.S.

The House DFL omnibus tax bill, unveiled at a Tax Day Capitol press conference on Monday, would raise the new revenues via a permanent increase in the state’s income tax rate for top earners, a temporary income tax surcharge, reducing some corporate tax exceptions and an increase in taxes on cigarettes and alcohol.

“We told Minnesotans last year that the DFL would be on the side of the middle class. We told them we would balance our state books once and for all and in a responsible way, and we told them we would pay off the debt owed to schools and make needed investments in education and jobs and property tax relief,” House Speaker Paul Thissen said. “The bill we are talking about today is how we live up to those promises.”

By the numbers:

• A permanent increase in the state’s income tax rate from 7.85 percent to 8.49 percent (hitting joint filers earning $400,000 or more and single filers earning $226,200 or more) would raise approximately $290 million.
• A temporary income tax surcharge on the top 0.5 percent of earners in Minnesota (taxable income higher than $500,000 a year for joint filers and $250,000 for single filers) would raise more than $1.2 billion during tax years 2013 and 2014. That would blink off after the $850 million remaining on the school shift is paid.
• A $1.60 per-pack cigarette tax increase and other tobacco tax changes would raise $434 million over two years.
• A handful of alcohol tax increases would raise about $355 million for the biennium. The increase would amount to about 84 cents on a 12-pack of beer, 47 cents per bottle of wine, and $1.58 per bottle of liquor, according to the House DFL’s release.
•  The bill would reduce foreign royalty tax exception, among other things, raising $343 million.

The bill also provides about $250 million in property tax relief through the Homestead Credit Refund, a revamped renters’ credit and increased aid to cities and counties, Thissen said. Thissen said the bill will include funding plans for three major expansion projects in the state — the Destination Medical Center in Rochester, 3M in Maplewood and Mall of America in Bloomington — although he had few specifics on how those projects will be funded under the bill.

These details may not be the same released along with the omnibus tax bill on Monday evening, when House Taxes Chairwoman Ann Lenczewski plans to walk through her bill in committee. House leadership professed to be unclear about the fine details of the plan, telling reporters two different total revenue figures for the bill ($1.5 billion and $2.5 billion) during the course of the news conference.

The House’s plan does not include an expansion of the state’s sales tax, which was discussed in the state Senate last week. Thissen said the House DFL did not campaign on changing the sales tax system last fall, adding that he thinks the conversation is not yet “ripe” in Minnesota.

The bill will also expand the sales tax to professional sports memorabilia and box and suite rentals at stadiums to help make up for a shortfall in projected electronic pulltabs revenues, which was supposed to pay for the state’s $348 million share of the new Vikings stadium.