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Mark Dayton’s latest tax-revenue pitch appears a real challenge to make work

Mark Dayton
MinnPost photo by Terry Gydesen
At political events, Mark Dayton frequently makes his case for needing increased tax revenues to balance the state budget.

Mark Dayton, who has made “tax the rich” his gubernatorial campaign mantra, in the near future probably won’t be making any fundraising trips to Naples, Fla., or any other Southern destinations where Minnesotans spend winters.

In a recent expansion of his “tax the rich” campaign, Dayton has said that he wants to tax all those wealthy Minnesotans who head to warmer climes during the long winters.

“I would ensure that anyone who spends significant time in Minnesota pays Minnesota taxes,” Dayton was recently quoted as saying. He, along with Matt Entenza, is challenging the DFL’s endorsed candidate, Margaret Anderson Kelliher, in the August primary.

Dayton may have a catchy idea that may appeal to many of us who can’t do anything but shiver through our winters.

But it’s also one of those campaign ideas that’s easy to talk about but not so easy to pull off. Even Dayton’s campaign staff says it is more a “concept” than a policy promise.

The problem is pretty simple: If you’re one of those people who spends 183 days in Florida, Texas or Arizona, then you can simply declare yourself a resident of one of those low-tax states. And if, for instance, you’re a Floridian, you have no legal obligation to pay Minnesota income taxes.

It’s difficult coming by reliable numbers on who (and how many) might be gaming the system, as well As where people are going, why they’re going (warm weather or hospitable tax policies). As a result, there are no real estimates of how much revenue Dayton believes could be collected.

Tom Gillaspy
MinnPost/Daniel Corrigan
Tom Gillaspy

“There have been vague estimates on the number of snowbirds in places like Florida and Arizona,” said Tom Gillaspy, the state’s demographer. “But they’re not all from Minnesota. It’s easier to make an estimate about how many people are in a state than where they came from.”

There are, Gillaspy notes, two types of winter-flight folks:

• There are the “snowbirds” who leave Minnesota for a few months every winter. But they remain Minnesota residents, he says.

• And there are those who leave the state for 183 days or more. They likely are Floridians, Texans or Arizonans, who only return to visit Minnesota in the warm months.

“If you spend seven, eight or nine months there [in the Southern, low-tax states] you really are no longer a Minnesotan,” Gillaspy said.

So how do you tax ’em on a Minnesota scale, as Dayton seems to be proposing.

“If you’re going to benefit from our services,” said Brian Klaas, Dayton’s policy director, “then you should pay at the same rate as everyone else.”

 But if a person is legally a Floridian how can you make him or her pay taxes in Minnesota?

This is, Klaas explains, a “concept” that is still on the drawing board. He suggests that a proportional system might be set up. For example, if a former Minnesotan is legally a Floridian but spends the three summer months in Minnesota, then that person could pay taxes based on the actual amount of time spent in Minnesota.

Klaas went on to explain that there already are laws on the books to nab “cheater” who claim to be residents of low-tax states but who actually aren’t spending the required 183 days in that other place to establish legal residency. The Dayton campaign believes those residency outlaws aren’t being pursued aggressively enough by the Department of  Finance.

The department does audit people it suspects may be trying to cheat on residency.

According to Kit Borgman, a spokeswoman for the department, those under suspicion are “typically asked to provide documentation that includes such thing as where they hold a driver’s license, where their vehicles are registered, where they are registered to vote and actually do vote, the location of their civic and religious affiliations and membership in clubs, where they file tax returns and homestead a residence, where they work or conduct business, the location of their financial and banking relationships and the number of days spent in Minnesota and other states during the years in question. The exact documentation required varies according to whether it is an issue of domicile or physical-presence residency.”

In other words, Minnesota is doing some of what Dayton says he’d like to do. And it would be very difficult — perhaps even legally impossible — to do the rest of what he says he’d like to do.

But it all sounds good on the campaign trail.

Doug Grow writes about public affairs, state politics and other topics. He can be reached at dgrow [at] minnpost [dot] com.

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Comments (5)

  1. Submitted by Ross Williams on 06/11/2010 - 09:39 am.

    “And if, for instance, you’re a Floridian, you have no legal obligation to pay Minnesota income taxes. ”

    That is a bit misleading. Many states can and do tax non-residents who work in those states. It doesn’t sound like Dayton intends to tax people who vacation here, he is going after people who maintain a home and spend several months here using services.

  2. Submitted by Brian Simon on 06/11/2010 - 09:58 am.

    I used to work for a startup in which an extremely wealthy ex-Minnesotan invested. At one point, he had to sign some documents, but was coming up on the threshold for time spent in Minnesota after which he would be obliged to pay state income taxes, so he flew to River Falls & had the documents driven to him there for signature. Then he turned around & flew back to FL.

    While I think its a sign of poor moral character to game the system like that, I also think its a sign of Dayton’s unsuitability for office if he thinks efforts like this will be enough to solve the budgetary woes of Minnesota.

  3. Submitted by Matt Abe on 06/11/2010 - 11:57 am.

    The DFL can’t seem to eliminate the greedy wealthy through taxation, so maybe they can force them to relocate year-round to Florida, Texas, or Arizona. It seems to be working on evil corporations like 3M, Polaris, and Honeywell, and others who have moved or at least moved jobs out of the state.

  4. Submitted by Joel Shinder on 06/11/2010 - 03:53 pm.

    Minnesotans have been instrumental in developing many warm-weather seasonal and touristic residential properties in low- and no-tax states. Once we even had several locally owned airlines supporting traffic to and fro. Only Sun Country remains (Delta doesn’t count), but southern routes remain busy. It’s all about climate for vacationers, and it’s all about retiree income taxation for retirees.

    To be sure, Minnesotans have and continue to benefit from the income and the spending of Minnesota’s seasonal residents who populate our state regardless of domicile. If Minnesota wants to increase its “take” from its floating population of migrant workers and migrant retirees perhaps “incentives” should be used rather than disincentives like threats of new taxation.

    Arizona, I hear, has an income tax rate half of Minnesota’s, but AZ does NOT tax traditional IRA and certain other pensioners’ income, and that’s regardless of the taxpayer’s income bracket. This reminds me of the situation of friends who live in France. There, it seems, there’s a steeply progressive tax system and a high value added tax (which captures the spending by those who fail to report income), but your personal welfare benefits (health care, child care payments, etc.) come to you equally, regardless of your income or wealth, because you’re human, because you’ve contributed to society and helped pay the freight. Perhaps that’s because France used to be a monarchy with a powerful aristocracy. In democratizing the country subsequent governments focused on the individual and his/her feelings and rights. We somehow lost that to the idea of adjusting for economic disparities. Well, that hurts feelings, and emotions often guide decisions about where to live.

    Minnesota does not reward people in small, humanistic ways that would perhaps tip the decision toward maintaining MN residency and domicile. Instead, it pours its own alternative minimum tax of 10.4% on top of its retirees who are limited to unearned income, which means that many Minnesotans would end up paying marginal Federal and state income tax rates approaching or exceeding (in 2013) 50%.

    Medicare is supported by a minimum premium that becomes an income tax for higher bracketed persons. Minnesota does not allow a tax deduction for that.

    Minnesotans have suffered huge market losses on investments, but they can only shelter a minimal amount of current income with those losses. Some Minnesotans might, in fact, outlive their losses as a result. Minnesota does nothing for citizens in that category.

    The list goes on. Wonder why we have MinneFloridians?

    It’s difficult to make a life in a new state when you’ve retired, and Florida is no picnic for 6 months (good grief!). Minnesota should become retiree-friendly for ALL of its retirees, regardless of their incomes, and maybe they’d spend more and even live more in MN.

    Remember when we could shop at Dayton’s? No more. No more.

  5. Submitted by Steve Rose on 06/15/2010 - 12:49 pm.

    The state could learn a lesson that most parents know; whatever you reward, you will increase. If you decide you don’t like the result, take away the reward.

    Did anyone think that when NWA and Delta merged, they would choose Minneapolis for their corporate headquarters? Not a chance. People leave for six or twelve months for tax relief; corporations find out-of-Minnesota locations permanently. When 3M expands, it is in Austin, Texas.

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