Dayton’s Proposal is Mostly New Spending, Not Less Taxes

A significant portion of what the Governor is proposing is subsidies of local government.

St. Paul, MN – In a press release Thursday, Governor Mark Dayton and Lt. Governor Tina Smith announced that they have proposed $300 million in tax cuts.

The proposal would ostensibly benefit some 450,000 Minnesotans. Much of the proposal is actually made up of spending by the state government however, rather than a reduction in revenues taken in.

“Our tax bill provides relief to more than 450,000 Minnesotans,” Dayton claimed in the release, “It provides assistance to those who need it most, while protecting the progress we have made to stabilize our state’s finances.”

Based on the numbers in the release, the proposal ends up seeing the state spending $1.60 in subsidies for every dollar of direct tax relief. Dayton’s proposal includes $21 million in middle class tax cuts, $61 million of child care tax credits, and $34 million of property tax credits for farmers. A further $186 million, however, is a series of subsidies.

Much of those come with wishes that the expenditures at the state level will cause more local government entities to reduce their property taxes. A hopeful sort of indirect tax break.

The proposal includes $30 million in state subsidization of emergency services at the city and county levels. School districts would also be subsidized by the state to the tune of an additional $62 million over four years. This is supposed to help school districts repay school bond levies without having to overly burden property owners.

“Our tax bill would provide significant relief to farmers by buying down the cost of local school district levies,” Smith said, “I urge the Legislature to provide this needed tax relief for Minnesota farm families this session.”

At $93.9 million the largest portion of the proposal is expanding the Working Family Tax Credit. This credit supplements the wages of low-income workers. Dayton and Smith’s proposal would make 107,000 new households eligible. More than 260,000 families currently receiving the credit would see an increase in their payments.

A series of proposals to eliminate corporate tax loopholes are also included in the proposal. The release describes what loopholes Dayton is targeting, but does not go into detail on the economic total effects of these changes. This is unlike the specifics of the rest of the proposal, at least in dollar amounts.

Anders Koskinen