Updated estimates of various tax increase proposals

Last month, the Minnesota Budget Project released a short brief on Revenue-Raising Options to Help Close Minnesota’s Budget Deficit, which outlined a number of tax proposals likely to be discussed this session. The brief includes estimates of how much revenue each option would raise, and what the impact would be on tax fairness.

We have now updated these revenue-raising estimates to reflect the February 2009 Economic Forecast (many figures were revised downward, due to the worsened economy):

Summary of Revenue-Raising Options

FY 2010-11

Create new income tax bracket: 9.7 percent rate for incomes above $250,000

$643 million

Create new income tax bracket: 9 percent rate for incomes above $400,000

$309 million

Enact a 10% income tax surcharge

$1.5 billion

Return income tax rates to 1998 levels

$1.7 billion

Return top income tax rate to 1998 level

$329 million

Eliminate business tax preferences

$91 million

Corporate tax throwback rule

$38 million

Raise business property taxes

$83 million

Eliminate sales tax exemption on clothing

$672 million

Eliminate many sales tax exemptions on goods and services

$2.6 billion

Our analysis doesn’t cover a few new proposals that have been in the news recently, such as taxing internet downloads of music and videos. So, I’ll be sure to blog on these proposals in the near future.

-Katherine Blauvelt

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