Jensen’s income tax idea sparks fire from Democrats

DFL lawmakers warn against GOP nominee’s proposal to reduce or eliminate state income tax.

ST PAUL, Minnesota — The message from Minnesota Democrats on Friday was simple and straightforward: Eliminating Minnesota’s personal income tax would leave a $15 billion hole in the state’s annual budget, which would jeopardize schools, nursing homes and other state budget priorities.

DFL lawmakers and others appeared at the state Capitol on behalf of Governor Tim Walz’s re-election campaign, to sound the alarm over the idea floated by the governor’s Republican challenger, Dr Scott jensen.

“Waiving the income tax may look good on a sticker during an election campaign, but it will have a devastating effect on our economy,” remarked Rep. Cheryl Youakim, the Hopkins Democrat who chairs the Division of Justice. property tax from the House Tax Committee.

Representative Youakim pointed out that state income tax accounts for 47% of all revenue collected by the state each year. The second-largest slice of the pie comes from the statewide sales tax, which amounts to 28% of all money collected by the Minnesota Department of Revenue.

Jensen’s pitch

Jensen raised the idea at a press conference last June when he presented his plan to cut inflation on consumers and workers. He mentioned that eight other states have learned to do without a personal income tax.

“We need to raise workers’ wages and one way to do that is to either eliminate, phase out or dramatically reduce our personal income tax,” Jensen told reporters.

“Have the people of Minnesota wondered what we would look like if we lost Arctic Cat, Polaris, JDS, if we lost Target? What if we lost Best Buy?

He echoed a warning Republicans have been sounding for many years that our high taxes create the risk of losing major industries to places with lower taxes.

Sen. Kari Dziedzic, a Minneapolis Democrat who serves on the Senate Taxation Committee, said Minnesota employers benefit from a well-trained workforce and other public amenities.

“Minnesota ranks very high in quality of life, and the money we put into those income taxes pays for the services.”

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The Jensen campaign released a statement on Friday calling it a desperate move and chastising Governor Walz for sending surrogates to speak on the issue.

Minnesota Tax Rates

Minnesota’s highest rate of 9.85% placed the state in the list of the ten highest income tax rates in the nation. But it’s important to note that the 9.85% rate only applies to the portion of your income over $284,000 per year for joint filers or $171,000 for single filers. Progressively lower rates – 7.8%, 6.8% and 5.3% – apply to the lower brackets of your income.

Reducing the lowest rate was a priority for Senate Republicans in the 2022 legislative session, in response to the state’s projected $9 billion budget surplus. Governor Walz and Democratic legislative leaders had agreed to a small tax rate cut at one stage of negotiations, but those talks ultimately broke down. The session ended with no additional tax bill.

States with no personal income tax include Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Some have floated the idea of ​​offsetting the losses by applying a sales tax on groceries and clothing, which are currently tax-exempt in Minnesota. Democrats have traditionally opposed it because those taxes would be hit hardest by low-income Minnesotans. They also point out that these sales taxes would generate about $1 billion a year in new revenue, well below the $15 billion generated by current tax rates.

Jensen calls his idea aspirational, taking bold steps to curb excessive government spending and bring some relief to families’ wallets, because such a plan should be phased in over at least eight years, he argues.

When asked by a reporter in June if it was realistic to talk about eliminating the income tax altogether, Jensen said skeptics once doubted Thomas Edison could create a working light bulb.

“Is it realistic to talk about eliminating Minnesota’s personal income tax? I think that’s about as realistic as inventing a light bulb or a computer on my phone that took up a room that size with mainframe computers.

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