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Published February 15, 2011, 03:16 PM

Half of Dayton's MN Deficit Fix Comes from Taxes

About half of Gov. Mark Dayton's plan to fix the state's budget deficit comes from higher income taxes on the wealthy in a plan he described Tuesday as one "to keep my promises I made to the people of Minnesota last fall."

By: Brian Bakst, Martiga Lohn,

ST. PAUL, Minn. (AP) — About half of Gov. Mark Dayton's plan to fix the state's budget deficit comes from higher income taxes on the wealthy in a plan he described Tuesday as one "to keep my promises I made to the people of Minnesota last fall."

Dayton outlined a two-year, $37 billion budget on Tuesday. It calls for more than $2.8 billion in new income taxes, which he says would fall on the top 5 percent of income earners, and a property tax on million-dollar homes. Dayton said other steps he takes would protect most taxpayers from increases, including safeguards against property tax hikes many homeowners have been coping with.

Minnesota faces a $6.2 billion shortfall over the next two years.

Dayton's tax plan would impose a new fourth bracket for single filers making $130,000 or more and couples who make more than $150,000. He also would enact a three-year surtax on people with $500,000 or more in taxable income.

The proposed budget is not without pain.

Dayton outlined $775 million in cuts for health and welfare programs. He would eliminate MinnesotaCare health coverage for 7,200 adults.

MinnesotaCare is a state-subsidized health care plan for the working poor, who pay premiums on a sliding scale. It offers less generous benefits than federal health care programs.

Dayton's health and welfare cuts would also increases surcharges on health providers by $627 million, but some of the money would be recouped in federal funding.

It would also cut reimbursements for nursing facilities by 2 percent and those who provide care in homes and community-based services by 4.5 percent.

The plan includes more money for education but wouldn't immediately repay more than $1 billion in aid that was delayed as part of last year's budget fix. Dayton said his goal is to begin paying that money back in the budget cycle that starts roughly three years from now.

But the governor would raise general fund spending on education to $14.2 billion, a slight bump. That's about 38 percent of the state's entire spending.

Dayton's budget directs money to optional all-day kindergarten for poor students. It would also set up a rating system to help parents make informed decisions about early childhood education providers.

Republicans who took control of the Legislature at the beginning of the session want to erase the deficit without tax increases. They are trying to hasten the process by directing their committees to finish crafting budget bills within six weeks, an accelerated timeline. The Legislature is constitutionally required to adjourn on May 23.

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