As State Reports Surplus, Dayton Wants To Cut Taxes

Governor Mark Dayton said more than $400 million from the budget surplus should be used for business and middle-class tax cuts.

Minnesota Management and Budget released the state budget forecast Thursday and projected a surplus of around $1.1 billion for the end of the current two-year budget cycle.
 
Now, Governor Mark Dayton wants to allocate $436 million of that money to help cut taxes, so long as the surplus forecast holds true when it's updated in February.
 
A portion of the surplus was already spoken for. By law, the state first must use $246 million to repay money it borrowed from public schools during the recession. Additionally, $15 million will be transferred to the state airports fund to restore money borrowed in 2008.

 
That leaves a surplus of $825 million left over for potential tax cuts, new services, or other programs next year.
 
Dayton said Thursday that $231 million of the surplus should be used to repeal three business-to-business sales taxes scheduled to take effect in April. And an additional $205 million should go toward middle-class tax cuts—which would include eliminating the “marriage penalty,” reducing state taxes for 640,000 Minnesotans.
 
The Minnesota Chamber of Commerce has been urging the governor to cut taxes for months now. The Chamber released a statement following Dayton’s press conference renewing its call to repeal the business-to-business taxes as soon as possible.
 
“The surplus removes any obstacles for repeal of these B2B taxes. The governor and legislators on both sides of the aisle have stated these are bad taxes and have expressed their support for repeal,” Chamber President David Olson said in a statement. “We ask them to live up to their word and act quickly to repeal the three new B2B taxes early in session before they do any more damage to jobs and businesses in key Minnesota industries.”
 
Olson added that eliminating the business-to-business taxes should only be the first step. Given the size of the potential surplus, the state “clearly overcorrected on revenues with the huge increases in taxes,” which needs to be fixed immediately, he said.

The three business taxes that Dayton said should be repealed include taxes on farm equipment repair, purchases of telecommunication equipment, and warehousing services.

The Chamber was hoping the taxes would be repealed at a special legislative session this fall, but they were left off the agenda because Dayton only wanted to discuss repealing a portion of the three taxes, rather than all three.

“I’m personally disappointed that the repeal of the farm equipment repair tax is not part of the agreement,” Dayton said during a press conference in late August. “But I understand that Republican leaders wanted to either repeal at least the entire equipment repair tax, which would be about $152 million, or all of the three business-to-business taxes, which would be $314 million.”

At the time, Dayton said the tax repeal issue would be off the table until he saw the November budget forecast.

Dayton said Thursday he won’t propose any new state spending until he sees the updated budget forecast in February.

Meanwhile, on a national level, the U.S. economic outlook isn’t as strong as Minnesota’s. The budget forecast noted that the country’s future outlook is weak due to uncertainty surrounding the federal budget and debt ceiling discussions.