Skip to Content

Dayton tax on rich would send Minnesota back near top of U.S. rankings

dayton budget
Minnesota House of Representatives Public Information Services
The governor repeatedly has argued that the top 2 percent of Minnesotans aren’t paying their share of state taxes.

In 1985, DFL Gov. Rudy Perpich surprised many members of his own political party when he established the twin goals of simplifying Minnesota’s income tax and getting Minnesota out of the top rankings in taxes in all income categories.

For Perpich, it was all about “jobs, jobs, jobs,” his political mantra for most of his tenure as governor. And he largely succeeded in his goals, achieving the passage of legislation that closed tax loopholes, reduced rates and provided for a simplified, one-page tax form.

DFL Gov. Mark Dayton, a protégé of Perpich, would move in the opposite direction.  Dayton would establish a new fourth-tier income tax rate that would send Minnesota back to the top of the national rankings in taxes on upper-income taxpayers.

Dayton would impose a tax of 9.85 percent on taxable income over $150,000 for single filers and $250,000 for married joint filers. The tax rate for the current top bracket is 7.85 percent. Dayton’s proposal would give Minnesota the fourth highest rate in the nation behind California, Hawaii and Oregon.

The increased levy would raise $1.1 billion in new revenue in the coming biennium, enough to erase a projected $627 million state budget shortfall and help fund Dayton’s initiatives.

The governor repeatedly has argued that the top 2 percent of Minnesotans aren’t paying their share of state taxes. For 2013, an estimated 54,000 Minnesotans would pay an average of $7,240 in additional taxes under his proposal.

Fair share

"My feeling is, everybody ought to pay their fair share of taxes,” he told an audience in Duluth. “If you make more, you pay more; if you make less, you pay less. That's what keeps this society functional.”

According to the Minnesota Department of Revenue’s most recent tax incidence study, most low- and middle-income earners in Minnesota pay about 20 percent more as a share of their income in total state and local taxes than the wealthiest Minnesotans.

However, the same study indicates that Minnesota’s income tax is “very progressive” – that is, it imposes taxes at progressively higher rates as a taxpayer’s income rises. It helps compensate for the regressive nature of the sales and property taxes, as well as the business taxes that people pay indirectly through consumer purchases.

Minnesota effective tax rates (2010)

Population decilePersonal
income tax
Business
taxes
Consumer
sales tax1
Homeowner
property tax
(before PTR)
First-1.3%14.3%7.6%5.7%
Second-0.7%5.8%4.3%2.0%
Third0.0%4.8%3.4%2.4%
Fourth0.8%4.1%2.8%2.3%
Fifth1.9%3.6%2.4%2.5%
Sixth2.7%3.3%2.2%2.7%
Seventh3.1%2.9%2.0%2.7%
Eighth3.7%2.6%1.8%2.6%
Ninth4.2%2.4%1.6%2.3%
Tenth5.1%2.0%1.1%1.4%
Total3.8%2.7%1.7%2.0%
Source: 2013 Minnesota Tax Incidence Study
1Includes motor vehicle and local sales taxes.

This study shows the effective income-tax rate for Minnesotans in the three lowest deciles of income is zero or less, with many lower income residents receiving cash back through the refundable Working Family Credit (similar to the federal  Earned Income Tax Credit). The effective income-tax rate gradually rises to 5.1 percent for Minnesotans in the top decile.

A study completed recently by the Minnesota Center for Fiscal Excellence (formerly the Minnesota Taxpayers Association) compared the 2010 income tax burdens in 41 states and the District of Columbia that have income taxes.

It found that Minnesota ranks 37th, or lower, in taxes for married filers on incomes of $35,000 or less. In contrast, Minnesota ranks 15th , or higher, for married filers on incomes of $100,000 or more. The same pattern was found for taxes on single filers, though Minnesota’s ranking tended to be somewhat higher in most income brackets.

Comparing the tax burden of households with $35,000 in annual income and those in higher income brackets, the study found that Minnesota is second only to New York state in the progressivity of its income tax.

For purposes of the study, the center says it employed the same assumptions about the mix of income and deductions claimed by tax filers at various income levels as those used in the Revenue Department’s tax incidence study. This marked the sixth such study the group has completed since 1997.

Upper-income taxpayers

The center also examined the impact of Dayton’s proposal on the national ranking of Minnesota’s income taxes on upper-income taxpayers.

Mark Haveman, executive director of the business-oriented group, says Minnesota’s ranking would rise from 11th to fourth for taxes on single taxpayers with $250,000 of income, from 12th to fifth for married taxpayers with $500,000 of income, 11th to fourth for married taxpayers with $1 million in income and seventh to fourth for single seniors with $250,000 in income.

Impact of Dayton tax plan on higher-income taxpayers

Filer type
/household income level
2010 Burden
/Rank (of 42 states)
Burden with
Fourth Tier
/Rank (of 42)
Tax
Increase
Single
$250,000
$15,336 / 11th$16,494 / 4th$1,158
Married Joint
$500,000
$31,348 / 12th$34,826 / 5th$3,478
Married Joint
$1,000,000
$64,828 / 11th$76,846 / 4th$12,018
Single Senior
$250,000
$13,915 / 7th$14,711 / 4th$796
Source: Minnesota Center for Fiscal Excellence

House DFLers would like to add a temporary surcharge on the wealthy on top of the governor’s proposal to help reverse the school-aid shift, a budget gimmick used to help balance previous state budgets. While House DFLers have not provided any specifics, the surcharge would likely nudge Minnesota up another spot or two in the national tax rankings.

Leaders of the state’s business community say they are concerned about the impact of Dayton’s proposal on businesses, both small and large.

The Minnesota Chamber of Commerce says the proposed fourth-tier tax rate will “threatens Minnesota’s competitiveness.” It will harm some 21,000 small business owners who pay individual income taxes on their business income, the chamber says.

Charlie Weaver, executive director of the Minnesota Business Partnership, says the impact will be “just devastating” for small businesses, while making it less likely that larger businesses “will stay and expand and grow in Minnesota.”

“Our companies already have to pay a premium to lure talent to Minnesota,” Weaver says. “They have to pay talent more to come here than they would pay that same person to work in one of their offices in another state. The governor’s proposal would add to these problems.”

Weaver also rejects the argument that upper-income tax payers aren’t paying their fair share of taxes.

“Right now in Minnesota, the top 5 percent pay 41 percent of the income taxes,” he says. “The top 1 percent pay 24 percent of the income taxes collected. By any objective measure, our system is fair – more than fair.”

Benefit for businesses

Dane Smith, president of Growth & Justice, a left-leaning research and advocacy group, argues that business actually will benefit from the Dayton budget and its increased investments in government programs such as education, health care and transportation.

“Meanwhile, a mountain of evidence shows that the top percentiles are capturing a larger share of total income and wealth than at any time since the Great Depression, while the effective tax rate for those top households is actually declining,” Smith says.  “Asking those top households to pay a little larger percentage from their windfall … just makes business sense.”

Smith adds that “a growing percentage of 1 percenters agree they should pay more” taxes, including investment mogul Warren Buffett and many members of the Fix the Debt group.

Whatever you may believe, it seems likely that the Dayton income tax proposal will pass in some form. It’s not difficult for most DFLers to vote for a plan to increase taxes on the wealthy.

“The polling [in support of the plan], I’m sure, is great,” Weaver says. “Some DFLers have told us that directly – that Minnesotans are fine with the ‘tax the rich’ mentality. I think they are clearly going to go down this road to some extent, but they will do so at their own peril and at the peril of Minnesota job growth.”

Get MinnPost's top stories in your inbox

Related Tags:

About the Author:

Comments (40)

Apologist whining

Charlie Weaver is an apologist and the Minnesota Chamber of Commerce, like so many chambers of commerce, is blowing smoke.

When an extra $10,000 in income taxes prevents that millionaire’s family from putting food on its (expensive, imported) dinner table, there will be some basis for discussion. Until that point is reached, all the arguments against Dayton’s attempt to make the state’s income tax rates more progressive are simply excuses for greed.

It should come as no surprise that the top income brackets pay a large percentage of the total income taxes. They’re collecting an even larger percentage of the wealth generated in the state every year, and far more often than not, their wealth is largely the result of someone else’s labor. Corporate profits are at all-time, record highs. Readers of the ‘Strib’s “CEO Pay Watch” feature will have noted the exorbitant annual salaries of the CEOs being profiled, especially those of executives who, while collecting their millions, shipped jobs out of the state, and in some cases, out of the country.

As Dane Smith pointed out, effective tax rates — that is, what’s actually paid, as opposed to what’s stated on paper — for both corporations and wealthy individuals are quite a bit lower than their apologists would have us believe. There’s no reason for anyone of more modest income to feel inordinate sympathy for the tax burden of the wealthy. Were my annual income ten times the current figure, I’d be happy to pay considerably more in taxes than I’m currently paying. I’d still have far more left over than my current income, and that’s the real bottom line.

Unreliable Sources

I'm afraid the author's interpretation of the tax incidence study is flawed. MN does not have a rather progressive tax system. Progressivity and regressivity are measured by "Suite indexes". Here's what the tax incident study concludes about MN's tax system:

"The full sample Suits index shows that most taxes levied in
Minnesota are regressive to some degree.
Only a few taxes, and only one large tax, the
individual income tax, are progressive"

Similarly it is simply not true that the first three deciles pay no MN taxes, as a percentage of their income they actually pay higher taxes than the top decile regardless of their tax refund. The tax incidence study concludes that the total tax burden for the bottom 1% is 32% of their income vs. 9.6% for the top 1%. The bottom 1% income is $10,000 or less and the average tax refund for an income of $10,000 is around $2,900 (for a married couple filing jointly), that's $300 short of the $3,200 burden, it's not a lot, but it's not zero.

As you work your way up the deciles, you see that the tax burden decreases to 14% in the 2nd decile, and then levels off at around 12% until you get to the tenth decile at which point it drops to 10%. The study further breaks it down to the top 5% and 1% who come in at 10.1% and 9.6%.

By the way, that top 10% captures 42% of all the income, the top two deciles make more money than all of the rest of the deciles combined.

As for the Minnesota Center for Fiscal Excellence (formerly the Minnesota Taxpayers Association), this is an organization with a documented history of producing misleading information. It's so-called "studies" are self published and not peer reviewed. There's no point in studying their numbers in detail but I can spot a problem right off the bat. They use a household income of $35,000 as a comparison point, however the median household income in MN was $41,000. Using the lower figure, which was apparently pulled out of someone's backside, will skew the results. Frankly, shame on the author for pretending this "centers" study is credible given their history. Republicans used this centers figures for over a decade and produce nothing but deficits and budget crises.

Tax rankings are a moot point anyways

It's like small government canards, no one has ever established an ideal size or rank so simple comparisons tell us nothing. Throw in other complications like local conditions and the idea of ranking and comparing actually become laughable. For all we know a big government with the highest taxes in the country is the best thing for MN, while being a really bad idea for Alabama. There's nothing scientific about this rankings. What we do know, is that as MN taxes have decreased, so has our infrastructure, public services, education, and fiscal viability...and our credit score.

Unreliable sources

"...that top 10% captures 42% of all the income, the top two deciles make more money than all of the rest of the deciles combined. "

And the remaining 90% "capture" 58%? You've got a problem with that?

We continue to mix tax apples and tax oranges

to come up with the sound bite that our Governor wants. This article does the same.

The income tax in MN is a progressive tax. There is no debate. The more you earn, the higher the rate you pay. It is a simple fact - and as the article points out - we have done much to close loopholes to make the tax apply in a rather straight forward manner.

Then you get to this statement in the article:

"....According to the Minnesota Department of Revenue’s most recent tax incidence study, most low- and middle-income earners in Minnesota pay about 20 percent more as a share of their income in total state and local taxes than the wealthiest Minnesotans."

Wait a minute. I thought we were talking income taxes not be fair. Now we switch to STATE AND LOCAL TAXES! So, now we are adding progressive (income taxes) and regressive (sales and property taxes) taxes together to conclude that the wealthy are not paying their fair share.

Could it just possibly be that I live more humbly, more frugally, on my higher income thus making my tax burden lighter? Because if I choose to live in a modest home, I am going to pay less property tax than someone who chooses to take a max mortgage on a huge house. If I choose to keep the old TV rather than buy new a one, I will save quite a bit in sales tax. Same if I choose to buy a used car verses a new one.

I am sick and tired of this "fair share" argument mixing progressive taxes (income) with regressive taxes that I can choose to lessen by making personal choices. Because, quite frankly, I will never pay the equivalent percentage in taxes. It seems like I am being vilified for choosing to live a more modest lifestyle than my income would suggest.

Banannas

Tim, that's great that you buy less stuff and therefor pay less in taxes. But your personal frugality doesn't mean that everyone is capable of following your lead. Poor people still need to get to work too and that means putting gas in the car, just the same as you do. And the gas tax, among many others, is not income based. They have to pay the same amount you do when they put 15 gallons into to tank so they can get to work tomorrow. Some taxes are simply unavoidable if you want to function in society.

At the same time though, it takes money to make society work. We still need the roads repaired, bridges inspected, police and fire protection, and other services. How else are we going to pay for it? More taxes on the middle class and poor?

That's fine Todd

but can we get off the "not paying my fair share" issue?

Say "we need more for this" and "we need to pay for it by this". I am cool with that. Even willing to pay more (if properly justified) Just no more of this BS of not paying my fair share.

I pay exactly what I am suppose to pay - sorry if the percentages don't work out because how I live my life style.

We're talking about populations, not individuals

Tim,

This isn't a personal attack on you. We have a deficit, we have a state we need to invest in, and our revenue is short. While all this happened income disparity increased, the wealthy made and have more money, median and below income dropped to 50 year lows, AND the wealthy got tax cuts.

Maybe you think it's "fair" that someone making $50 million dollars pays a smaller percentage of their income in taxes than someone who makes $50,000, simply because that's the tax rate. All I know is we've been trying to balance the budget on the backs of the bottom 6 deciles for ten years and it hasn't worked, you have to go where the money is.

What is the rich's "fair share"?

The rich pay 39.6% federal income tax and soon-to-be 9.8% MN state income tax (possibly as high as 11% according to some House DFLers) for a total of just under (or just over) 50%.

If this amount isn't "fair", then what amount is and will it ever be enough? Try this simple thought exercise...what if MN state income tax rate was raised to 15% -- does anyone believe Govt. wouldn't just increase spending up to (and then beyond) that level of revenue? And wouldn't everyone again start chanting for the rich to pay their "fair share"? Or maybe we should just cap income and make the rich pay 100% above that level. After all, does anyone really need to make more than, say, $5 million per year? (heavy sarcasm)

Is it "fair" to increase income tax rates for the rich by over 25% (7.85% to 9.85%) or over 40% (7.85% to 11%) while the other 98% pay nothing more? It wasn't just the rich who got tax cuts...EVERYONE did.

P.S. please don't reference a decade where we had 90% tax rates without also understanding that almost nobody paid those rates due to all of the loopholes/deductions that existed at the time.

What's fair?

Mr. Cotter,

Tax revenue needs be sufficient enough to meet government expenses, otherwise you have deficits and fiscal crises. Government costs whatever it costs, it's not a function of revenue. Accordingly tax rates need to be high enough to cover expenses, we adjust tax rates accordingly.

If government collects more tax revenue than it needs you have a surplus, if you tax receipts are insufficient you have deficits. Since deficits create fiscal crises and damage budgets surpluses, within reason are preferable.

Tax rates have nothing to do with government spending. Republicans cut tax revenue thinking it would control spending and all they got was huge deficits. Government spending is not dictated by the amount of money on hand, it's dictated by legislators who pass budgets. Those budgets are dictated by the cost of the services government delivers, it costs whatever it costs regardless of the amount of money on hand. Government spending has continued to increase despite deficits because the cost of the services has increased for a variety of reasons. We have increasingly old and decaying infrastructures and a demand for new infrastructure, aging populations, and simple inflation. The growth of government has been remarkably stable regardless of tax receipts for this reason. Likewise, privatization schemes ended up increasing the cost of government because the expected private sector efficiencies never materialized and in fact don't exist.

The reason we're looking at taxing the wealthy is because they alone have seen increased wealth over the last decade, and they are paying a smaller percentage of their income in taxes. The wealthy got bigger tax cuts than everyone else. As for the 90% tax rates of the past and the loopholes, despite the loopholes the wealthy paid higher taxes than do now. Obviously loopholes still exist, the wealthy are no more paying 39% now than they were paying 90% then.

more and more and more

Bureaucracies within bureaucracies grow and protect themselves...they feed on ever increasing tax...it is not tax revenue....they tax other peoples' revenue. Quite calling money taken in by the government as revenue. They do not earn money. If someone can become rich, great! They spend money on all sorts of things...GOOD! That is what capital does...If the damn money-lusting government did not suck so much of my revenue, I could actually spread more around to real people through hiring them. Many states do not have income tax...how do they do it? Here it is crony capitalism and socalistic tendencies that merge into a behemoth that has no end in sight. Who cares if the wealthier get wealthy? They rise and fall on the wheels of fortune...as do hard-working individuals...except that the tax code prejudices against the wealth accumulation of the poor and middle class. It is a bottle-neck that keeps everyone down, How about we do not give money to billionaire sports folks and billionaire Mayo clinics and tax Dayton at 90%? How about that? Or how about the novel idea that you start downsizing a bloated government and stop spending so much money on worthless programs. Look at the fraud that keeps going on listed within the government's own internal audit departments....endless leeches sucking away the lifeblood of the state...

Race to the top!

“Dayton tax on rich would send Minnesota back near top of U.S. rankings”

This headline is NEWS? Making MN one of the highest tax states is a goal of the DFL.

I am surprised the MinnPost headline did not read “Minnesota falling behind the tax and spend States of California, Hawaii, and Oregon.”

Again

Simply trotting out the facile "Tax and Spend" argument accomplishes nothing, because it means nothing. It's like complaining about "Chew and Swallow" eating. Levying taxes and determining where those funds are spent are integral parts of any government big or small, representative or dictatorial. I'm starting to wonder if we will all soon be graced by a return of the "Sand-is-food" right-wing tropes that used to be so popular here.

Nice examples

It's awfully hard not to laugh when the states that the anti-taxers trot out to try to scare us are paragons of high standards of living and a well-educated and healthy and happy citizenry. Perhaps we're just "getting ahead" of the "we don't invest" states like Alabama and West Virginia.

Huh and Huh?

Tim:

"The income tax in MN is a progressive tax. There is no debate. The more you earn, the higher the rate you pay. It is a simple fact - and as the article points out - we have done much to close loopholes to make the tax apply in a rather straight forward manner."

So you think 9.6% is higher than 32%? THAT's the fact according to the tax incidence study.

Richard, the top 20% are earning more than the bottom 80% combined. Yes, I have a problem with that, and so does economy. We're rediscovering that trickle down doesn't work. Once you reach income disparity levels this high it actually drive the economy into recession for majority of the population. US household income is at it's lowest point in 50 years right now.

You have a problem and so do I.

Paul, I absolutely agree with you. I should have added a "smiley" to my comment.

The current tax code is littered with loopholes favoring ultra high income individuals, i.e. Warren Buffet. (At least he had the good grace to acknowledge the disparity.) Think about the tax schemes to park money in offshore entities to avoid US Tax. Have you looked at the effective US tax rates that are paid by Fortune 500 companies? Some of the comments posit the notion that we are taxing so-called "job creators." So it's better to tax people's income that are at or near the poverty line?

Sorry to rant.

Roger that smile Ricard

Sorry I jumped all over it. I usually have a better sense of humor.

Values

This article touches on Gov. Perpich's, as well as many others', including the majority of the business community's, belief that lower taxes, and/or the perception of lower taxes, will lead to "jobs, jobs, jobs." Taxes are indeed a means to an end. However, from our perspective today, after at least 40 years of trying to promulgate this low-taxes-more-jobs relationship into being, there seems to be little credible evidence for the validity of the equation. Indeed, just the opposite results seem to be the proof of the pudding. Instead of the number of jobs, taxes should be discussed in relation to the way they contribute to improving the quality of life people are able to live; that is the apt measurement of the success of society and its agents, business and government. I suggest it is an opportune time to examine our social values, paying particular attention to the function and functioning of business and government and their measurements of 'success'. (http://hdr.undp.org/en/), and (http://www.stiglitz-sen-fitoussi.fr/documents/rapport_anglais.pdf)

Income Taxes

The wealthy can certainly afford to put in a couple of extra bucks to help pay for the state. Let's face it: someone who makes hundreds of thousands of dollars a year isn't going to miss $1158.00. It's not like their kids are going to go hungry at the end of the day. The only down side is they may have to take their vacation in Vale this year instead of the south of France.

"Mixed" tax types unified - by being paid out of a single income

What Mr. Dornfeld left out:

Here is the table of income deciles from http://www.revenue.state.mn.us/research_stats/research_reports/2013_tax_... :

1st $10,937 & under
2nd $10,938 - $18,316
3rd $18,317 - $26,397
4th $26,398 - $35,600
5th $35,601 - $46,507
6th $46,508 - $59,998
7th $59,999 - $77,704
8th $77,705 - $101,616
9th $101,617 - $146,400
10th $146,401 & over

So the first thing to observe is what Mr. Dornfeld decided to leave out of his article, because it wouldn’t fit with this particular song and dance: the actual income levels of those people in the bottom 3 deciles, not just their tax rates. These deciles represent incomes less than about $26,000. OF COURSE these people should pay no income tax ! They barely have enough to live on, if they have even that.

Please see the actual study noted above. Its Figure 3-3 illustrates graphically the **extreme** REGRESSIVITY of the total tax burden here in MN - IN SPITE OF the progressive profile of the income tax rates.

The HIGHEST earners pay THE LEAST, the LOWEST earners pay THE MOST.

Also, see http://www.itepnet.org/whopays3.pdf, a 2009 study that shows conclusively that virtually all the 50 states’s tax systems are regressive.

And yet, Mr. Dornfeld’s source for his table above, the Minnesota Center for Fiscal Excellence (MCFE - recently changed their name from Minnesota Taxpayers Association, I guess to throw people off from who they are), standing reality on its head, says, “Minnesota's tax system already does an excellent job of respecting the principles of progressivity and ability to pay.”

And Mr. Dornfeld: your very framing of this issue as some kind of weird race to the bottom (“We’re #7, that’s so bad. Let’s reduce taxes for the wealthy so we can be #6 !!”) is laughable. Only people like this so-called MCFE could have put you on to a weirdly slanted column like this. What story are they going to feed you next ?

So while the Chamber and Mr. Weaver wet their ruffled shirts with crocodile tears, they may as well know we are on to their deceptions. Of course they don’t want to pay their fair share.

Progressive taxes

Minnesota does not have a progressive tax.
according to an earlier Minnpost article, the top earners have a lower income rate than low-income earners, with low-income earners paying 12.4 percentage compared to those making $447,889 . Top earners have a lower effective tax rate than households making less than $9,782 for the year.
The effective rate for the top 5 percent of households, those earning $175,704 and higher, was 9.7 percent — compared with 12.4 percent for a family earning between $31,000 and $40,000.
This latter percentage has actually grown in the last 2 years.
For the top 1 percent, those earning $447,889 a year, the rate fell to 8.9 percent.
I do not know why this person thinks he is being vilified for spending less on optional luxury items like a more expensive house or a new TV. That is not the argument here.
And some people like to use the the state's income tax and compare it with other states. I've always thought this was a meaningless comparison. We get something for our money: better schools, better infrastructure, parks, roads, safety concerns.
You cannot compare them. Some businesses move to lower-tax states but they certainly lose a lot of things that residents want.

Bias detected!

Dornfeld writes: "Growth & Justice, a left-leaning research and advocacy group"

Fair enough. I know this group, and I've read Dane's op-ed columns in the STrib and elsewhere. Definitely progressive.

But then again, Dornfeld also writes: "Minnesota Center for Fiscal Excellence" with no similar qualification, such as, for example "a right-leaning think tank."

Same pattern with the Minnesota Chamber of Commerce, which is not described, for example, as a "right-leaning business advocacy group" for some reason.

But then again, there really is a reason, namely that too many journalists feel that only biases to the left need to be pointed out.

Also, I second the comments of other commenters who have pointed out the shoddy and biased reports of the Minnesota Center for Fiscal Excellence, a right-leaning think tank (that is struggling with that whole "think" thing).

Education

We do things a few things different than other states when it comes to taxes. That's why comparing Minnesota's tax rate to other states is misleading. For example, here is the breakdown and state rank for how Minnesota funds K-12 education:(2011-2012)

Local government 13.2% (Minnesota ranks 49th in the country)
State government 80.6% (Minnesota ranks 3rd in the country)
Federal government 6.1% (Minnesota ranks 47th in the country)

Most other states primarily use local government to fund education thus their state taxes can be a lot lower.

http://www.nea.org/home/54597.htm

Putting it another way

The headline says, as if this were cause for some alarm,

“Dayton tax on rich would send Minnesota back near top of U.S. rankings.”

So what?

Ring The Bell

That headline would be cause for rejoicing in my book, not cause for alarm. We need to reinvest in Minnesota, not turn our backs as our infrastructure crumbles around us. Who wants to live in a state where the schools are crap, bridges collapse, and the streets have so many potholes you have to visit the dentist for new fillings every other week.

Get the tax done and let's get Minnesota rebuilt.

Agree, let's invest

But why should the investment dollars come solely from the top 2% income earners? Why should their tax rates increase 25-40%* while everyone else pays the same?

Dayton's plan will increase top rate from 7.85% to 9.85% (25% increase). House DFLers plan will increase top rate from 7.85% to 11% (40% increase).

Why the wealthy?

Daren,

The wealthy have captured 90% of the economic growth over the last two decades. They seen their share of the economy grow 400% while median household income has shrunk to it's lowest share in 50 years. You can't get money out of a turnip, you have to go where the money is. Since the wealthy benefit just as much if not more from government spending and programs it's only fair that they contribute more. In addition to that, tax cuts for the wealthy outpaced everyone eleses tax cuts for the last 20+ years.

Let's All Take a Moment in the "Way Back Machine"

and remember that, back when Minnesota was among our nation's "high tax" states, our state economy also outperformed the economy of every other state in our region,...

consistently not going down as far during recessions,...

and bouncing back faster.

As we have all experienced, ever since the Chamber of Commerce and their Republican sycophants started "improving our state's business climate" by cutting taxes, cutting government agencies to the point where state regulations could not effectively be enforced, attacking unions in order to more easily reduce the living standards and work environments of average workers, etc....

we've seen a VERY few at the top of the income ladder experience doubling and even tripling of their incomes, while the rest of us have seen our incomes stagnate if not go backward.

If Gov. Dayton is successful at taking us back to those "high tax state" days, he will also take us back to the days of HIGH PROSPERITY for far more of the citizens of our state.

If a few of our "I'll never have ENOUGH money to feel satisfied (because I'm not CAPABLE of FEELING satisfied)," Chamber of Commerce executive types get their noses out of joint and leave the state, I suspect we'll find far more skilled, far more reasonably-priced folks who will be only too happy to take their places and manage businesses in a more economically-equitable state,...

while those who leave will find that they're no happier in whatever low tax paradise they ship themselves off to than they were here, because, as the old saying goes, "Wherever you go there YOU are."

The collection of taxes is a

The collection of taxes is a means of gathering revenue. The sales tax or a value added tax along with other flat taxes are very good for collecting revenue because they aren't easy to escape (broad base, low rates). They do not, however, punish the wealthy for being wealthy. To do that you need income and property taxes which in turn are worth evading, and less efficient. Inefficient in this case means that as you raise the rates, the amount of money you collect per rate increase goes down as it becomes increasingly worthwhile to pay to avoid those taxes.

A pitiful article

Equating 1985 with last 12 years is very dubious at best. Plus 12 years of less taxes on the rich have not produced "jobs, jobs, jobs.". The last 12 years have produced the downfall of the middle class, however.

1985

Well, let's not forget that Reaganomics created the recession that cost Bush re-election. "It's the economy stupid" didn't work because Reagan and Bush had been economic geniuses. I don't know why so many people seem to forget this. Regan triggered two recessions and supposedly proved that deficits don't matter. Talk about revisionist history.

One last thing.

I know I've posted a lot on this thread today but one last thing. I have written a long blog about the nuts and bolts mechanics of tax revenue and tax rates that examines when or how the wealthy could or would be overtaxed. It's a multi-part series but some people found it interesting. You can read it here: http://pudstrand.fatcow.com/blog/?p=8

OK, one last one last thing

If you're wondering why we should tax the wealthy here's a really nice little video that displays the actual nature of our current wealth disparity in the United States: http://infosthetics.com/archives/2013/03/comparing_the_perception_of_wea...

O.K. let's raise the taxes and we'll see

Not much improvement. The last biennium the State spent 13% more than the previous biennium. The present Governor's budget with tax increases on the rich increases biennial spending by maybe 8%. If the House and Senate get around to increasing the taxes some more and spending even more, the biennium spending increase maybe gets to 10%.

After two years with 11% more spending most of you say that our schools are woefully underfunded, our roads and bridges are terrible, there is more poverty and homelessness, little affordable housing, etc. Why do you think that another increase of 10% will have us singing Happy Days are Here Again?

We'll have higher taxes on the rich (yay!) and everything else will seem just the same.

Two years of increased spending?

Tom says:

"After two years with 11% more spending most of you say that our schools are woefully underfunded, our roads and bridges are terrible, there is more poverty and homelessness, little affordable housing, etc. Why do you think that another increase of 10% will have us singing Happy Days are Here Again?"

Two things: First, government spending actually increased more under Pawlenty despite tax CUTS, that's why we ended up with an historically large deficit. Second, the fact that an 11% increase in spending has produced little results (if you accept that position) simply demonstrates how woefully insufficient our spending has been and far our services and infrastructure have declined. We've dug a deep deep hole and we're going to have to spend a lot of money to get out.

The question I have for the Chamber...

You know, whenever I see the business boys line up behind republican magic plans (i.e. cut taxes and wait for the magic to happen), I'm always puzzled. From Reagan to Bush to Pawlenty and everyone in between, no matter who deploys these fatuous economic plans (Let's remember Al Gore's reinvention of government) they produce budget crises and recessions. So the question I have is: why do these business boys think recessions are so great for business?

I really think one of the biggest problems we have in this country is a mediocre business and executive class that's incapable of elementary problem solving and become economically illiterate. Business leaders used to be community boosters who believed in improved infrastructure and public investment. Even when their taxes were low they spent their own money to create public assets. Furthermore business people used to understand that their fortunes depended on having a robust middle class that could afford products and services. All today's business leaders seem to know how to do is vote against their own best interests and create and perpetuate recessions. The Southwest Rail corridor is a perfect example. We know that the line will revitalize and spur growth and commerce yet the Chamber endorses Republicans who have nothing but fight to block "choo choos" for two decades now.

Collapsing infrastructure, declining government services, and backed-up courts are NOT good for business. Our competitors world wide are investing, looking ahead, and proactive. Our competitors are moving into the 21st century while our business leaders seem to want to move to Somalia, a paradise of zero taxes and small government.

Recessions

"So the question I have is: why do these business boys think recessions are so great for business?"

Overall recessions are bad for businesses, but there are certain segments and certain people who do well. They don't care if the rest of the country goes into the tank as long as they got theirs.

Increasingly we're seeing a business community that doesn't care about the country, their workers, the government, or their social contract with society. Or even their own company, as we've seen at places like Tyco, Enron, Arthur Anderson, and a whole host of other firms. As long as the bonsus keep flowing, the executives don't give a rip if everything else goes to hell in a hand basket.

Yes Todd, but then...

I guess the real question becomes: "Who do these chambers really represent?" And: "Why do they throw their weight and money behind a party that damages their memebrers?" When are the members going to start asking these questions?

I've never made $250,000 in my life, but I am self-employed,

and one thing I learned when I went free-lance is that personal and business income taxes are calculated differently.

The right wing pundits count on the fact that most people don't realize this. Most people assume that business income taxes operate on the same principle as personal income taxes: income minus a few limited deductions and credits, so that your tax bill may make you think twice about hiring someone to mow your lawn or rebuild your kitchen.

A business, on the other hand, can deduct all sorts of things from taxable income, including employee wages and benefits, equipment and furniture used in the business, R&D, inventories, even the overhead on the space used for business activities.

Anyone who tells you that taxes are preventing his or her business from hiring people is proclaiming Lie #1.

The real reasons for low employment are almost always one of the following: 1) There isn't enough work for additional employees to do, usually because of lack of customers, or 2) There's plenty of work to do, but the company prefers to work the existing employees harder or outsource the work to a temporary agency or offshore the work to a low-wage country or hire illegal immigrants under the table or automate several processes (e.g. the notorious automated phone tree, the automated checkout line) and put the savings into shareholder dividends or retained earnings, or 3) The top executives could order the hiring of more people but prefer paying their friends on one another's corporate boards huge bonuses that could each support five or ten rank-and-file employees for a year, whether the top dogs deserve this bounty or not.

Nowadays, 2) seems to be the most common ultimate reason for lack of jobs, but it leads to 1), since people without work tend not to buy anything unnecessary.

Lie #2 is that increased income taxes would force companies to raise prices. This assertion fails as simple arithmetic, since ultimately, higher prices would mean higher earnings, which would mean higher taxes if there were no expenditures to offset them.

Lie #3 is that taxing more of the personal income of the top 1% would cause job loss. It's a lie because wealthy people don't hire corporate employees with their personal incomes. They may hire nannies, gardeners, cooks, personal trainers, and other household and personal help, but they don't hire the assemblers and secretaries at their business out of their personal income. They keep their personal and business accounts separate by incorporating their business.

I've found in conversations with friends and relatives who have never been self-employed that they don't know these things. That's why the right-wing wailing about job loss being caused by "tax and spend" DFLers sticks in the public mind so easily.

By the way, I love Jonathan Ecklund's remark that "tax and spend" governing is like "chew and swallow" eating. There has never been a government in the history of the world that did not tax and spend.

Really?

So you tax suck-ups out there think it is good to keep raising taxes and growing government? 250,000 a year is the wealthy?
What about corporations that exist that are only one or two people? Small companies with one or two contractors and consultants can have a phenomenal year of 250,000 [relative goodness based on only one person] then the next year 20,000.
On top of that add having to pay all withholdings for Federal and State, plus insurance, plus operating expenses, and on and on...there is no way to ever move ahead without living like a pauper. One great year can tax me into oblivion...and is near to doing so. It is at the point of moving...but that sucks. Why do you people support the oppressive taxation of government. Did you think 1984 and a Brave New World were templates or root for the Oppressive Educators on the album the Wall?