Rep. Jeanne Poppe, DFL-Austin, called Gov. Mark Dayton’s budget proposal a “sweeping change” and a positive first step toward trying new options and getting new perspectives.

“Here’s putting things out there the people of Minnesota will have the opportunity to discuss and comment on,” Poppe said.

Dayton proposed $2.1 billion more Tuesday in state taxes, partly by subjecting more items to the sales tax in a tradeoff for a lowered rate.

The Democrat’s proposal increases the amount owed on income above $150,000 for single filers, subjects high-end clothing to the sales tax and raises cigarette taxes by 94 cents per pack. But he also wants to cut the corporate tax and provide property tax rebates of up to $500.

One of the aspects of Dayton’s proposal Poppe highlighted as worth considering was Dayton’s plan to drop Minnesota’s sales tax rate from 6.875 percent to 5.5 percent — a cut that would bring the rate to a level not seen since 1981. Dayton’s office says the 20-percent decrease is the largest in state history, and Minnesota would go from the seventh-highest sales tax rate to the 27th-highest among U.S. states.

Food and medical services would continue to be exempt, but people would pay for a range of services that aren’t taxed now and clothing above $100 would be taxed, marking the first time Minnesota applied its sales tax to apparel.

Along the lines of income taxes, a proposed new fourth tier income tax bracket of 9.85 percent would apply to taxable income over $250,000 for married joint filers and single filers who earn above $150,000, would apply to only 2 percent of Minnesota taxpayers. His administration says it would raise $1.1 billion in the next budget cycle.

“The governor has been saying he was going to do that for as long as he’s been running for office,” Poppe said. “There are people who pay less in taxes than others.”

As for an increase in cigarette tax rate, the state sits at $1.58 a pack right now. Dayton says his proposed increase would make Minnesota’s per-pack tax equal to Wisconsin’s.

Dayton says he has been reluctant to raise the cigarette tax because it’s among the most regressive taxes. That means it falls harder on people with low incomes. But Dayton says he thinks that is ultimately outweighed by the fact that increasing cigarette taxes has been shown to reduce the number of people who smoke.

Poppe said higher cigarette taxes could prove beneficial if it acts as a deterrent to people to stop smoking.

Included elsewhere in the proposal is a promise to schools of $52 more per student, a jump that’s part of a more than $600 million increase in education spending Dayton is seeking for the state’s next two-year budget. He is also pushing for more money for all-day kindergarten programs, early education scholarships and for the state’s public universities and colleges.

Dayton also said Minnesota government relies too much on funding from property taxes. He says it’s the state’s least fair tax because it must be paid regardless of homeowner’s income.

His plan would give every homeowner, including farmers, a rebate of up to $500 starting with their 2013 bill, depending on their income. It also restores full funding of a property tax credit for renters.

The proposed changes are all contained in a two-year plan that would fuel about $38 billion in state spending, which is about $1 billion more than the state was due to shell out. Dayton’s plan is the starting point in a debate likely to reach into May. At a minimum, lawmakers must plug a $1.1 billion projected deficit.

With fellow Democrats now in charge of the Legislature, Dayton’s plan carries tremendous weight and a high likelihood that much of it will be enacted.

Lawmakers must approve a budget by July 1 to avoid service interruptions. Barring unexpectedly deep spending cuts, the state is expected to spend more than the $35.2 billion that it was on course to shell out in the current two-year budget.

Unlike in 2011, when a newly elected Dayton had just a couple of months to craft his recommendations, the governor has spent much of last year examining options.

Overview hearings on Dayton’s budget will begin Wednesday. But lawmakers are expected to wait until March or later to begin votes on the recommendations or their substitute. In late February they will get an updated economic forecast, which will determine whether the estimated deficit they must erase is larger or smaller.

“We have the luxury of getting to see the reaction across Minnesota” before acting, said House Tax Committee Chairwoman Ann Lenczewski, DFL-Bloomington.

Poppe said Dayton’s budget proposal put money where the priorities are, and will allow Minnesotans to easily understand where the money is going.

“Considering what the governor is doing, I’m very interested in seeing what the whole package is and hearing from people,” she said.

Sen. Dan Sparks, DFL-Austin, was not available for comment.

The budget address marks Dayton’s return to public view after spending the past month recuperating from spinal surgery.

 

— The Associated Press contributed to this report.