Last week the Minnesota House passed a series of comprehensive bills that invest in priorities like our children’s education and property tax cuts.
To pay for these important investments, we passed our tax bill. It eliminates our $627 million deficit without gimmicks and pays back the remaining $854 million school shift.
The bills we passed make Minnesota’s economy stronger.
Small businesses create jobs when there is demand for their products and services. An ‘all-cuts approach’ to our budget process shrinks demand and does not create an environment conducive to job creation. For example, cuts to local government aid (LGA) and county program aid (CPA) over the past decade caused property taxes to skyrocket by 86 percent.
Those tax hikes fell on the backs of middle class families who then had less money in their pockets to spend at local businesses. Without customers fueling demand by purchasing products and services, companies could not build up the capital necessary to expand their workforce. In fact, the LGA cuts that sparked painful property tax hikes led to less demand, forcing many businesses to lay off workers.
The bills passed by the House this week are designed to increase demand and create jobs by putting more money in the pockets of consumers.
The House DFL tax bill invests $270 million into direct middle class property tax cuts for nearly one million Minnesotans through the Homestead Credit Refund, a retooled renter’s credit, and increased funds to cities and counties. Under the new Homestead Credit Refund, homeowners in Rice County will see an average increase of $203. In addition, Rice County will receive nearly $450,000 more in CPA in 2014 and the city of Northfield will receive over $660,000 more in LGA.
Providing help with property taxes for middle class families reverses the trend of LGA and CPA cuts over the past decade that caused property taxes to skyrocket. It puts more money in consumers’ pockets that will be pumped right back into the economy.
As we all know, nothing comes free. The investments we’re making in areas like property tax cuts cost money. The House DFL plan generates the revenue needed to build a stronger economy in a way that’s fair.
One component of our tax plan raises additional revenue for our investments by increasing the income tax rate to 8.49 percent on the wealthiest 1.1 percent of individuals (taxable income greater than $400,000 per year for joint filers). High income earners have done extremely well coming out of the recession.
Asking those who can afford to pay a little more in income taxes to help improve Minnesota’s economic vitality is a much fairer approach than pushing the cost of the things we need onto the backs of middle class families in higher property taxes. Polling shows a majority of Minnesotans support the House approach.
In the coming weeks when we’ve settled on a final budget, I’ll use my bi-weekly column to outline the investments we’re making, how we’ll pay for them, and the benefits we expect.