The current economic crisis means that more Minnesotans are struggling at the same time that the state has fewer resources to help them. We’ve argued for a balanced approach to solving the state’s budget shortfall, including raising revenues, that will allow the state to maintain investments in education, health care, job training, services for the elderly and people with disabilities – the vital services that help Minnesotans weather these tough times. A balanced approach also best positions the state for when prosperity returns.
We’ve updated our widely-used analysis, Revenue-raising options to help close Minnesota’s budget deficit, which analyzes a number of recent proposals to raise revenues, measuring the fiscal impact of each. It also discusses how a revenue-raising package can be put together that helps solve our budget deficit and makes progress on reversing recent trends that have shifted more of the responsibility for funding government services on to low- and middle-income Minnesotans.
Revenue-raising options does not promote any particular policy proposal, but rather looks at a range of options that have been part of the recent policy debate. Those options are summarized in the table below.
Figure 1. Summary of Revenue-Raising Options: General Fund Revenue Raised
| Proposal |
FY 2011 |
FY 2012-13 |
| Create new income tax bracket on high-income households |
$170 million |
$468 million |
| Enact a 10 percent income tax surcharge |
$688 million |
$1.6 billion |
| Return income tax rates to 1998 levels |
$820 million |
$1.8 billion |
| Return top income tax rate to 1998 level |
$140 million |
$383 million |
| Eliminate certain business tax preferences |
$156 million |
$283 million |
| Enact a corporate tax throwback rule |
$15 million |
$40 million |
| Eliminate sales tax exemption on clothing |
$258 million |
$604 million |
| Eliminate sales tax exemptions on many consumer services |
$372 million |
$868 million |
| Increase alcohol taxes |
$121 million |
$278 million |
The legislature has not yet passed its final budget bills solving the current deficit, and another large budget deficit remains for the next biennium. The court challenge to the 2009 unallotments and uncertainty about additional federal Medicaid dollars for the state are two additional wildcards that could add to the budget shortfall.
While the end of the legislative session is two weeks away, the discussion about a balanced approach will continue, both at the halls of the capitol and in our communities.
-Nan Madden
