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2013 tax bill makes progress toward economic and racial justice

Creating a new income tax bracket for the highest-income Minnesotans plays a huge role in narrowing the gap between the share of income that high-income and other Minnesotans pay in state and local taxes.

The 2013 Legislative Session brought Minnesota some much-needed improvements to the tax system. The omnibus tax bill raises revenues to fund the state’s priorities and close the budget deficit, and makes Minnesota’s state and local tax system based more on the ability to pay.

What people may not realize is that these changes also promote racial justice in Minnesota.

Racial justice advocates have made the connection between tax policy and racial equity. Low-income Minnesotanspay a higher share of their incomes in state and local taxes than those with higher incomes. It’s also the case that the benefits of economic growth are unevenly distributed, and people of color are more likely to have lower incomesin Minnesota. That means that people of color are over-represented in the income groups that pay the greatest shares of their incomes in state and local taxes.

The situation would be worse without two important state tax credits: the Working Family Credit and the Property Tax Refund. The Property Tax Refund is available to homeowners and renters, and the refund for renters is particularly important for racial equity, given lower levels of homeownership in Minnesota’s communities of color.

The omnibus tax bill reduces some of the regressivity of the current tax system by:

  • Creating a new income tax bracket for the highest-income Minnesotans. This new bracket plays a huge role in narrowing the gap between the share of income that high-income and other Minnesotans pay in state and local taxes.
  • Increasing property tax refunds for renters and homeowners, so that low- and middle-income Minnesotans don’t pay too high a share of their incomes in property taxes.

These changes are important steps toward tax fairness and racial justice in Minnesota. However, there is more work to do. In his supplemental budget, Governor Dayton recommended updating the Working Family Credit, which is Minnesota’s version of the federal Earned Income Tax Credit, to conform with federal EITC improvements. Unfortunately, this provision was not passed into law this year. This policy would further address fairness in Minnesota, and we urge policymakers pass this measure in the next legislative session. And there’s more to do to address Minnesota’s underlying racial disparities in income and homeownership.

This post was written by Caitlin Biegler and originally published on Minnesota Budget Bites.

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Comments (1)

  1. Submitted by Dennis Tester on 07/25/2013 - 12:57 pm.

    Low-income Minnesotans

    also pay a higher share of their incomes for a loaf of bread than those with higher incomes. So unless you’re willing to also place the price a loaf of bread or a gallon of gasoline on a sliding scale based on the customer’s income, the price that each citizen pays for government should also be the same.

    If you really want “economic justice” in this society, eliminate the income tax altogether. It’s an immoral and counterproductive tax on labor and should be replaced by a flat fee that represents the actual cost of government.

    My street was recently re-done with new water pipes, sewer pipes, curbs, boulevards, sidewalks and asphalt re-paving, Each homeowner was assessed the exact same amount of money for the work, regardless of incomes, which range on my block from $12,000 a year (SS recipients) to a couple hundred thousand per year (attorneys and small business owners). This is an example of people paying for government services based on the actual cost of those services. I didn’t hear any demands for “economic justice.” We all received the same level of benefit from the government.

    But if that isn’t “progressive” enough for you, then replace the immoral income tax with a 10% consumption tax. Since rich people consume way more than poor people, they would pay more than the rest of us, which is what your objective seems to be anyway.

    Charging the “rich” a higher income tax rate in addition to the higher taxes they would pay even if the rates were identical, is nothing more than a dishonest attempt to collect more taxes from a minority of the population knowing full well they lack the numbers to retaliate at the ballot box.

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