ST. PAUL - A bigger tax cut and depositing more money in the state budget reserves are Gov. Mark Dayton's priorities in how to deal with a $1.2 billion surplus.

The Democratic governor this morning announced he wants $616 million in tax cuts, a figure that includes $500 million the House is expected to approve later today. He also would spend $162 million more than is included in a $39 billion, two-year budget approved last year.

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After tax cuts and new spending are taken out of the surplus, Dayton would boost the current reserve $455 million, its first increase since 2001.

“Our improving economy has greatly improved the state’s budget forecast, giving us the opportunity to put more money in the pockets of Minnesota families and businesses,” Dayton said in a statement. “I urge members from both parties to work together to pass these tax cuts quickly.”

Dayton was to talk to reporters about his budget plans later today.

The governor would eliminate sale taxes on local governments and reduce those paid by nonprofit groups. He also would simplify the state tax and eliminate a tax on gifts.