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Daily Glean: Minnesota’s tax system: more punishment for the poor

MPR’s Tim Pugmire reports that Minnesota’s tax system has become even more regressive, meaning the poor pay a higher share of their income than the rich. The biennial report, based on 2006 earnings, shows lower- and middle-income folks pay about 12 percent of their income in state and local taxes; plus-$500,000 earners pay about 9 percent. A state official says the gap widened because the rich are becoming richer faster. Overall, the tax burden declined from 11.6 percent in 2004 to 11.2 percent, AP notes.

More study: The results will buoy those who want to raise upper-tier rates. You can check the year-by-year march of effective rates here. There’s surprisingly little change from 1990 for the richest half of the population, except for the top tenth, whose payments dropped from 12 percent of income to 10 percent. The bottom third were punished, however.

Election contest minute: Norm Coleman’s ballot “universe” is shrinking faster than my 401(k). Officials opened 1,500 previously rejected absentee envelopes to check for misplaced registration cards; only 84 potentially valid votes emerged, the PiPress’ Jason Hoppin writes. The Strib’s Pat Doyle and Kevin Duchschere say two-thirds are in Coleman counties, though that doesn’t necessarily mean he’ll get the lion’s share. The Stribbers say Coleman’s 1,725-ballot pool “probably has shrunk by several hundred.”

The PiPress’ Dennis Lien says a habitat/arts council recommended spending $40 million in new sales taxes to buy 187,000 acres of Grand Rapids-area woodland. The money would be disbursed over two years and represents roughly a third of the overall sales-tax allocation. Metro legislators complain they were shortchanged and the recommedations won’t pass, the Strib’s Doug Smith writes. Others say restoration, not just acquisition, needed more dough. KSTP showcases the kvetching here.

Nearly every Tom Petters development gets big play, but the Strib buries news that alleged co-conspirator Larry Catain was released from jail. A judge ruled that Catain took $14,000 from court-frozen funds to pay personal and company bills, not to do something nefarious. Catain’s lawyer calls it a mild rebuke for court-appointed receiver Doug Kelley, but a magistrate agreed with Kelley before the judge intervened. Petters is still in the pokey, by the way.

The Strib’s David Shaffer, working the food safety beat, says a Minnesota method for reducing pathogens should be expanded to more items. The plan, developed to keep astronauts from getting food poisoning, requires manufacturers to identify their riskiest steps and have a plan for it. Peanut Corp. didn’t. Then again, maybe we can just develop a vaccine; the Strib’s Thomas Lee says the USDA has approved a Minnesota company’s E. coli stopper. Of course, coming up with healthier procedures for killing cattle might help, too.

The Strib’s Jim Buchta says despite long waiting lists for low-income housing, developers can’t get financing. They can’t resell their tax credits at a high enough price because no one has cash and everyone is terrified of risk. Nine months ago, the credits fetched 90 cents on the dollar; today, that’s around 70 cents. One group has 5,800 people on a waiting list for its 100 projects.

Related: MPR’s Annie Baxter profiles two homebuilders who are succeeding amid the construction depression; one markets to women, and the other guarantees a purchase price for your current home. MPR’s Jessica Mador says a foreclosure-mortarium bill is again working its way through the Legislature; Gov. Pawlenty vetoed it last year. Is there any reason to suspect that will change?

No shock: Sarah Jane Olson got permission to spend her supervised parole in Minnesota, the PiPress’ Emily Gurnon reports. The former Kathleen Soliah will be released from prison March 17.

The Strib editorialists advocate a plan to let a five-judge panel come up with a 2010 redistricting plan before the Legislature weighs in. Usually, it’s the other way around. The retired jurists, appointed by the two parties, would draw up a plan the Legislature could accept or reject unamended. If it’s spiked, the panel tries again, with another up-or-down vote. The Legislature can do what it wants after two rejections. Some incumbents are fearful, and independents and third parties would be shut out (like they are now!).

Southwest Airlines just got here and already the PiPress’ John Welbes is bugging them for more routes! The airline just cut 4 percent of its total capacity despite opening here, but its CEO says a western city like Denver would complement its current Minneapolis-Chicago gateway. The CEO says the crappy economy is not a discussion-ender, but there are no plans in the works.

The PiPress’ Gita Sitaramiah says Valleyfair is for sale. The current owner, Ohio’s Cedar Fair, has had the property for 30 years, but decided to sell after a “strategic review.” Who on earth would buy in this economy? Someone who might eye the site’s 77 undeveloped acres! Zigi Wilf, I’m lookin’ at you!

Nort spews: The PiPress’ Phil Miller says Joe Mauer’s post-surgery back pain isn’t abating, putting his early season in jeopardy. The Wolves’ Death March deepens with a 110-99 home loss to the dreadful Washington Wizards. For good measure, Randy Foye sprained his ankle. Minnesota remains in line for the sixth draft pick, but is only a game-and-a-half away from fourth. Sign of the times: the PiPress’ Julie Forster says the Twins will broadcast 30 games in Spanish, up from four last season.

Comments (16)

  1. Submitted by Thomas Swift on 03/10/2009 - 11:49 am.

    Ya know, Dave, I try; I really do.

    But every time I’m just about ready to bury the hatchet, you twist the knife.

    Headline reads: “Minnesota’s tax system: more punishment for the poor”

    Commentary reads: “The biennial report, based on 2006 earnings, shows lower- and middle-income folks pay about 12 percent of their income in state and local taxes; plus-$500,000 earners pay about 9 percent.”

    Lower and middle income; 12%, or about 40% of the total yearly haul….check.

    +$500k; 9% or about 60% of the total yearly haul…check.

    But, what about the poor, Dave? You know, the ones that you say are being punished?

    Oh, yeah. They not only pay 0%, tax time is cash bonus time for many of them, right Dave? Poor little fella’s….gettin’ beat down all the way to the bank.

    Why do leftists hate the truth, Dave? Cripes; I just don’t get it.

  2. Submitted by Bernice Vetsch on 03/10/2009 - 12:32 pm.

    Why do rightists hate poor people, Tom?

  3. Submitted by David Campbell on 03/10/2009 - 03:44 pm.

    best line in the whole glean:
    Ziggy Wilf, I’m lookin’ at you!

  4. Submitted by Eric Ferguson on 03/10/2009 - 04:53 pm.

    What’s more bizarre Thomas, your willful ignorance of facts, or your frequent mentions that you have the facts and other don’t. There is nobody who doesn’t pay taxes. Nobody. Or if it is possible to avoid all taxes, pray tell. Do you have to relocate to the deep woods and live off the land? Or do you have to go to the moon?

    Or maybe you pretend only income taxes count. I love that old trick.

  5. Submitted by Thomas Swift on 03/10/2009 - 05:35 pm.

    BTW, Eric. If you ever want to discuss the taxes that everyone *does* pay; have a care.

    As I write this, it is the Democrat caucuses in the legislature that are considering extending sales tax to clothes, and it was they that pushed though the increase in gas tax and other vehicle taxes and fees.

    You may recall that Republican voters booted out four of six GOP representatives that joined them.

    And although I also fault Pawlenty for his disingenious “tobacco fee” which hits lower income people harder than those better off, I would love to hear your argument in support of the idea that Republicans are, in any measure, to be faulted for the taxes levied upon “the poor”.

  6. Submitted by Thomas Swift on 03/10/2009 - 05:57 pm.

    Oh, and one last thing.

    Page 17 of the 2009 Minnesota tax incidence study says:

    “The effective tax rate for the first decile (that’s poor people) is overstated for several reasons.”

    “By including only money income, the substantial amounts of food stamps and housing subsidies received by the poor are ignored in this study.
    Consequently, money income at the low end of the income distribution does not provide an accurate measure of overall economic well-being. For all of these reasons, effective tax rates in the first decile are overstated by an unknown but
    possibly significant amount.”

    That means before you can complain about how we’re “keeping ’em down”, you have to factor in how much we’re “propping ’em up”.

    Just sayin’.

  7. Submitted by Aaron Klemz on 03/10/2009 - 07:04 pm.

    You know TS, I read that too. But if you are going to quote that paragraph, you ought to also note that according to this study, the lowest decile pays over 20% of their income in taxes. But the DOR data does prove a couple of IRREFUTABLE facts – 1) the top income earners pay a SMALLER PERCENTAGE of their income than all other deciles of taxpayers, and 2) that the percentage of income paid in taxes by these top earners has been declining since 2002 and the decline will continue through 2011. Just remember these facts when the spin machine makes high-quality arguments about how high the taxes are on the rich and how unfair it is that the pay a higher tax rate. Simple fact is that they don’t, and our regressive system is continually getting more regressive.

  8. Submitted by Thomas Swift on 03/10/2009 - 08:10 pm.

    Aaron, although I find it hard to understand how the report can state that the numbers are “overstated by an unknown but possibly significant amount”, and yet state definitively that the the poor pay 20% of their income in taxes, but let us leave that aside.

    The fact of the matter is that they are *not* paying it income taxes. Want to reduce the tax burden on the working poor?

    Call your legislator and tell them “no” to taxing clothes, tell them that “sin” taxes hit the poor hardest, tell them that low income people buy gasoline too.

    Unless you advocate a 100% tax rate, the poorest of us will *always* pay a higher percentage of taxation, the amount goes up and down but cannot, and will not ever be close to equal.

    But let us not forget that the people that pay the highest percentage also get the biggest “bang for their bucks”.

    We all drive the same roads, drink the same water, call the same fire department, and most of us depend on the same army to defend us. These are legitimate functions of government; no one will argue that.

    I may not pay 20% of my income in taxes for those services, but then, no one pays my heating bill for me; no one pays my mortgage (but I’m thinking of sending it in this year!); the police have never been to my house; my wife provided “early child education” and care for our kids; we’ve never needed a public defender; I’m paying for health insurance out of my own pocket right now; I certainly have never received more money back from the IRS than I paid in…you get the idea.


    This all boils down to whether you believe the government has exceeded it’s mandate, which would force you to conclude that it spends too much, and taxes *everyone* too much, or whether you believe we are all born wards of the government to one degree or another and should count ourselves lucky for whatever money the government can spare.

    For me, the answer is clear, and human history bears my conclusion out.

  9. Submitted by Aaron Klemz on 03/10/2009 - 09:30 pm.

    This “bang for buck” argument is fundamentally flawed, and the flaw is borne out by another right-wing saw that upper-income people are the “job creators” that we can ill afford to tax. You see, the wealthy benefit in a nonlinear manner to government amenities. The owner of the trucking company benefits disproportionately from transportation infrastructure. The convenience store owner benefits from police presence reducing the need for him or her to purchase private security (having recently returned from Bogota, Colombia, I’ve seen this lesson in operation.) There are always “winners and losers” in terms of who is net paying in in taxes and who is net taking out in government services. However, the answer of who is the winner and the loser is porous – it will change over a lifetime, it will depend on life events that may be beyond your control. Interesting that you’ve abandoned the position that the wealthy pay a higher proportion of their income in taxes in favor of this “bang for buck” position, but it assumes that the benefits from government spending are either equal or tilt toward the poor.

    2) I would heartily support eliminating regressive consumption taxes in favor of progressive income taxes. Ya got me.

    3) I think we have a different view of human history.

  10. Submitted by Tom Anderson on 03/10/2009 - 10:11 pm.

    More regressive? Obviously. Gas, cigarette, wheelage, transit, etc. taxes have increased and are all considered regressive. Seems like we are doing this on purpose.

    Since the biggest disparity seems to be at the very top, should the upcoming income tax increases be targeted at the top 1 or 2% rather than dragging in the folks at %250,001 annual income?

  11. Submitted by Thomas Swift on 03/10/2009 - 10:13 pm.

    “This “bang for buck” argument is fundamentally flawed, and the flaw is borne out by another right-wing saw that upper-income people are the “job creators” that we can ill afford to tax.”

    Eric, that paragraph makes absolutely no sense at all. Tossing words into a bag does not a valid argument make, no matter how vigorously you shake them.

    “The owner of the trucking company benefits disproportionately from transportation infrastructure.”

    Do you have any idea what the taxes and license fees on a tractor\trailer rig are per year? Do you understand why commercial plates say “apportioned”? You *might* argue that they still don’t cover the wear and tear, but you certainly can’t suggest they don’t pay 300 times what we pay to license a car.

    “The convenience store owner benefits from police presence reducing the need for him or her to purchase private security (having recently returned from Bogota, Colombia, I’ve seen this lesson in operation.)”

    Well, I can’t speak to Bogota, but you’ve obviously not been to North Minneapolis lately, or to the Rainbow food store in Midway, or (since we’re comparing different areas) to any convince store within 50 miles of Chicago.

    Maybe you’re suggesting that they only have to hire one off duty cop per location, whereas they would otherwise have to outfit their own PD.

    I’m not abandoning my position regarding who pays what, Eric. You’re either deliberately attempting to distort it, or you failed to comprehend it in the first place.

    For a cogent lesson in the history of the failure of cradle to grave governmental intervention in human lives, I highly suggest Brian Crozier’s “The Rise and Fall of the Soviet Empire”.

  12. Submitted by Thomas Swift on 03/10/2009 - 10:25 pm.

    One last thing.

    Eric, you said that “it assumes that the benefits from government spending are either equal or tilt toward the poor.”

    Is social services not the second largest piece of the spending pie? (Public education being the largest)

    Aren’t Democrat legislators telling us, every day, that cutting social services amounts to balancing the state’s budget on the backs of the poor?

    You can’t have it both ways, Eric. Choose your poison, and better luck next time! 😉

  13. Submitted by Aaron Klemz on 03/11/2009 - 08:29 am.

    Who’s Eric?

    Well, it’s back to putting words in a bag and shaking vigorously….

  14. Submitted by Erik Petersen on 03/11/2009 - 09:29 am.

    I have little doubt this measurement showing high earners pay less as a percentage of total income in tax payments IS TRUE. But it’s a bogus metric. It’s arrived at by adding the income tax, which has progressive rates, and local taxes, which are flat mil rate. Mathematically the real estate taxes, because they are flat, have the effect of mitigating the progressivity of the incidence rate for high earners. These ‘high earners’ ostensibly pay a top state income tax rate that’s 46% higher than the low bracket.

    All of which is to say, the progressivity of tax incidence is a sham when calculated this way. The income tax is progressive and local taxes are flat – BY DESIGN – , and you can’t co-mingle them to come to some conclusion about overall progressivity.

    I don’t particularly think that the income tax brackets rates as they stand currently are an accurate reflection of wealth and class. But if you want to make an argument about progressivity (David, Mnpublius, various members of the DFL), you are technically and philosophically obligated to focus on the income tax. Abstain from including real estate taxes. They aren’t mixable.

    I don’t think it’s just conservatives who will object to raising the income tax rates to offset the lack of progressivity in the real estate rates. A better case needs to be made.

  15. Submitted by Eric Ferguson on 03/11/2009 - 11:52 am.

    Thomas, you’re trying to counter arguments I never made. You said there are people who don’t pay taxes. This is clearly false, and you even inadvertently admitted that in your response to me.

  16. Submitted by Thomas Swift on 03/12/2009 - 09:49 am.

    Income taxes, Eric. We were discussing income taxes. I didn’t inadvertently admit that everyone pays *some* kind of taxes, I think I pretty clearly agreed.

    But, when you add up all of the subsidies they receive, there is no way people in the first decile pay more than 20% of their incomes in taxes of *any* kind.

    BTW, I mistakenly put your name to Aaron’s comments above, but you probably caught that.

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