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Minn. Senate proposes hiking top tax bracket rate

ST. PAUL, Minn. (AP) — Democrats who run the Minnesota Senate unveiled a plan Tuesday to raise the top income tax rate by 1.55 percentage points, which would fetch an estimated $1.2 billion more in revenue that would cover a projected budget deficit and planned spending increases.

The Senate's proposal would go further than competing plans put forth by Gov. Mark Dayton and the House Democrats, which would foist the higher tax burden only on the top 2 percent of earners. It would raise the state's top rate from the current 7.85 percent to 9.4 percent on taxable income of more than $140,960 for married couples and $79,730 for individuals.

The new rate, which would be applied to 2013 income, would affect about 6 percent of Minnesota filers, said Senate Taxes Committee chairman Rod Skoe, DFL-Clearbrook.

Gov. Mark Dayton has proposed a new 9.85 percent tax rate on income above $250,000 for married couples and $150,000 for single filers. In the Democratic-led House, the income tax wouldn't be imposed on incomes so low and the permanent tax rate is lower than the governor's recommendation. But the House plan would also tack a 4 percentage point surcharge on incomes above $500,000.

"When this bill becomes law, we will accomplish the goals of the session - to balance the budget over the next four years," Skoe said as he laid out the proposal to his committee.

Sen. Julianne Ortmann, R-Chanhassen, said the plan hits too many people who are more middle class than wealthy.

"To the extent tht this is an effort to tax the rich, this is not it," she said. "This is a failure."

The differences in the proposals advancing in the House and Senate mean the exact shape of a new tax code won't be known until mid-May.

Minnesota has a $627 million projected deficit, but lawmakers also want to boost spending on education and other programs they regard as priorities.

The Senate tax plan, which could reach a floor vote by week's end, is far more encompassing than the income tax.

It would:

— Beef of aid programs to local governments and for property tax relief accounts.

— Raise taxes on cigarettes and other tobacco.

— Broaden the sales tax rate to cover clothing, a range of currently exempt consumer services, digital downloads, and some business transactions while dropping the state's sales tax below 5.7 percent — a full percentage point less than it is now. Many people would qualify for a "clothing sales tax credit."

— Impose a new 13 percent tax on sports memorabilia — such as jerseys, trading cards and bobbleheads — to foster youth sports and, some anticipate, shore up a weak financing plan for the impending Minnesota Vikings stadium.

— Cut the corporate tax rate and lift the sales tax on capital equipment purchases by companies.

— Provide tax breaks or aid to the Mayo Clinic, 3M Co. , Baxter Healthcare Group, the Mall of America and other major planning to launch significant business expansions in the state.

All told, the state would net $1.8 billion more over the next two years once all of the credits and tax breaks are factored in.

Copyright 2013 The Associated Press.