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Minnesota tax collections higher than economists predicted

ST. PAUL -- Minnesota collected $555 million more in taxes over the last three months than state economists had predicted in February as both individual and corporate income turned out higher than expected. The news means lawmakers will have even...

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ST. PAUL - Minnesota collected $555 million more in taxes over the last three months than state economists had predicted in February as both individual and corporate income turned out higher than expected.

The news means lawmakers will have even more money than expected to dispose of next year. Beset by gridlock, lawmakers last month left close to $1 billion of projected revenue unspent when they adjourned in June. The $555 million of extra money, a 2.8 percent increase, is in addition to that unspent money.

Lawmakers could spend some of this surplus to lower taxes, start new programs or road construction projects, bank some of it in the reserves for a rainy day - or all of the above.

The $555 million extra the state collected is considered one-time money, which lawmakers usually resist spending on ongoing programs.

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This windfall, announced Friday,  doesn't say anything about how much money the state will collect in taxes in the current two-year budget, which began July 1. The state's economists noted that the national economy was weaker than expected in the first part of the year but appears to have recovered, while Minnesota's economy faces some specific challenges, including low iron prices that are having a huge impact on mining operations in the Iron Range.

The economists lowered their prediction for the U.S. economy's performance this year but increased it for 2016.

In Minnesota, DFL lawmakers took credit for the $555 million in extra revenue, which closed out a budget approved by 2013's DFL-controlled Legislature.

"Minnesota economy continues to grow under policies put in place by Governor Dayton and a DFL-led Legislature that expand economic opportunity for all Minnesotan, not just the wealthy few," said Rep. Paul Thissen, DFL-Minneapolis and the House minority leader.

Republicans drew a different conclusion: that the revenue surplus means Minnesotans are overtaxed.

"We have said that increased tax rates that the Democrats passed were unnecessary, and I think we're seeing that proven every month when these things come out," said Sen. David Hann, R-Eden Prairie and the Senate minority leader.

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