The Dayton budget plan

Gov. Mark Dayton's proposed budget covers the two-year period beginning July 1.

• New taxes would net a total of $2.1 billion, mainly through income and sales taxes.

• Sales tax rate would drop to 5.5 percent from 6.875 and broaden to most goods and services, including clothing over $100, over-the-counter drugs, auto repairs and legal services. Food, clothing items under $100 and prescription drugs would remain exempt.

• Sales tax in the seven-county metro area would be 0.25 percent higher to fund transit, including light rail.

• The top 2 percent of wage earners would pay a new, fourth-bracket rate of 9.85 percent. Would affect about 53,000 returns; joint earners making $250,000 in taxable income and single filers making $150,000 of taxable income.

• Corporate taxes would fall to 8.4 percent from 9.8 percent. Some business exemptions would be eliminated. Statewide business property tax would freeze and unemployment insurance taxes would drop by $347 million over two years.

• Cigarette taxes would rise by 94 cents per pack, for total of $2.17 per pack.

• Homeowners would see a $500 per year property tax rebate.

• Companies with Internet sales in Minnesota would have to collect the state sales tax.

• "Snowbird tax" would extend the state income tax to certain part-year residents.

• E-12 spending would get increases for special education, early learning and optional all-day kindergarten for more students without a fee.

• More higher-ed spending would include additional grant funding and more funding for MnSCU and University of Minnesota, contingent on a review of the U's current spending.

• Payback of final $1.1 billion owed to schools would be delayed until 2017.

• Cities would get an extra $160 million every two years, counties would get another $80 million.

Broadening of sales tax, particularly to over-$100 clothing purchases, has long been controversial, and businesses are expected to push back hard against paying sales tax on business-to-business services.

Plan becomes the template for Legislature, now controlled by Dayton's DFL Party. Issues such as sales tax expansion will be debated at length; Legislature will produce its own tax and spending plan.

JIM RAGSDALE