Minnesota's projected budget deficit shrank by a fifth to $5 billion on Monday, prompting Gov. Mark Dayton to withdraw his proposal for a 3 percent temporary surtax on top incomes that would have given the state the nation's highest income tax rate.
The forecast from Minnesota Management and Budget officials showed the shortfall for the coming two-year budget was down from an earlier projection of $6.2 billion. State economist Tom Stinson attributed the improvement to federal action that helped the economy, including a payroll tax cut and delay in a capital gains tax hike.
Dayton immediately dropped his call for a 3-year surtax on incomes starting at $500,000, which would have raised $918 million in the upcoming budget period. The Democratic governor said he was fulfilling a promise to avoid imposing the nation's highest tax rate. Still in play, though, is his call for a new permanent top income tax bracket of 10.95 percent, just a hair under Hawaii's top-in-the-nation rate of 11 percent.
