The Scoop on Temporary Taxes

It was suggested by House Democrats this month to place a temporary surtax on Minnesota’s top earners, Republicans jumped back.

House Minority Leader Kurt Daudt gave the harshest criticisms, saying that there is nothing temporary about the tax. His concern hasn’t proven to b completely true in Minnesota, however, as lawmakers had passed a temporary surtax in the early 1980s to deal with the extreme deficit. Lawmakers raised the rate in 1982 to 10 percent and then extended the tax for another year.

The governor’s revenue commissioner, Myron Frans, has snapped back, saying that the legislature repealed the temporary tax in 1984.

A budget expert, the former finance commissioner for the state at the time, Jay Kiedrowski, said that the tax helped the state balance the budget when the country was in the middle of a recession.

Frans said in Minnesota, history shows surtaxes that have been repealed.

However, not all of the temporary taxes have remained temporary. For instance, a temporary gas tax was passed in 1937 that increased the price to 4 cents a gallon. That tax was made permanent four years later. Income taxes also received a temporary raise in the 1960s and were extended later on.

The Minnesota sales tax was also extended to 6 percent in 1982, a change that was made permanent the following year. There was also a temporary increase in 1991 that raised the sales tax to 6.5 percent that was never phased out.

Frans suggested that the key to a temporary tax is for there to be a time for it to be turned on and a time for it to be turned off so that it can be completely removed when it isn’t needed anymore.

There is also the suggestion of a surcharge on the top 1 percent of earners in order to pay back the remaining $800 million that is owed to schools from the times that the legislature has used education funds to solve other budget problems. It is believed that this tax would only last two years and then be turned off when it wouldn’t be needed anymore.

This is a plan that hasn’t earned a lot of support from the governor or Democrats in the Senate. It is said the temporary tax increase would be difficult to implement and that the tax rate would have to be adjusted quickly.

If the Senate Democrats would decide to go after the top 5 percent of owners, approximately 125,000 people would be affected. This would mean that the income limit of the affected would be closer to $130,000 rather than the $250,000 limit that the governor would prefer to use in order to create $1.1 billion in revenue. The governor has been adamant about new taxes not being imposed on the middle class.