The tax plan released this week by Minnesota Gov. Tim Walz was portrayed as hiking taxes on the wealthy and well-off in order to ease the burdens of the COVID-19 recession that fell more heavily on lower-income residents.
Or as the Walz administration characterized it in materials it put out during the Tuesday announcement of the plan, the proposal asks “large and profitable corporations and the wealthiest Minnesotans to pay their fair share so our students, working families and small businesses have a fair shot.”
And to a large degree, it does: Walz’s plan would create a fifth income-tax tier for married couples earning more than $1 million, a designation that would affect less than 1 percent of taxpayers, according to the state department of revenue.
It would also create a higher tax rate on capital gains — profits from the sale of assets like stocks or property: 1 percent if profits on the sale was between $500,000 and $1 million; 4 percent if more than $1 million. And it would increase the state’s corporate income tax, known as the corporation franchise tax, for profitable corporations.
Taken together, the three measures would raise $1.3 billion of the $1.66 billion total tax hike proposed by Walz, and the governor’s plan has been praised by DFL lawmakers and constituency groups, many of whom have been calling on corporations and the wealthy to pay more even before the pandemic.
But the burden from at least one of those taxes doesn’t just fall on the well-off or profitable corporations. Minnesota’s corporation franchise tax is borne by owners and shareholders — but also by workers and customers. Up to half of that tax is paid by residents who probably don’t count themselves as being among the “wealthiest Minnesotans.”
Shifting the tax burden
The argument against the state’s corporation franchise tax is often touted by the usual sources: the Minnesota Chamber of Commerce, the Center of the American Experiment and Americans for Prosperity Minnesota — conservative organizations and business groups that have long advocated for lower taxes and all of which came out against Walz’s plan.
But the less-than-obvious effects of the corporate franchise tax have also been identified by another Minnesota organization: the Minnesota Department of Revenue.
Every other year, the state agency prepares a report that attempts to determine who ultimately pays taxes rather than just who — or what — writes checks to the state. And in 2019 , the Minnesota Tax Incidence Study was prepared by the agency to assess “the burden of state and local taxes across income groups.” Or as then-Revenue Commissioner Cynthia Bauerly put it: Who pays Minnesota’s taxes?
In discussing taxes on business property, purchases and corporate income, the study concludes that most of the tax burden is “partially shifted to consumers and workers.”
“The amount of tax shifting varies by tax and by business sector, depending on the scope of the product market (local or national) and the magnitude of Minnesota’s tax rates compared to those in other states,” the report stated. “To shift a tax, the individual or business legally liable to pay the tax must alter its economic behavior because of the tax. For example, a property tax paid by a business firm may lead the firm to raise its prices, lower its pay to employees, or the business owner may experience reduced profits.”
The analysis estimated that, in 2016, 57 percent of the burden from the state’s corporate income tax was borne by Minnesotans, with the rest paid by entities outside the state. Of the amount carried by Minnesotans. 76 percent was borne by consumers and 8 percent by company workers.
On Thursday, after the Senate Taxes Committee had current Revenue Commissioner Robert Doty in to go through Walz’s proposal, Committee Chair Carla Nelson, R-Rochester, responded by citing the 2019 tax study.
[image_caption]State Sen. Carla Nelson[/image_caption]
Of the tax assessments on corporate profits, Nelson said, “those costs are passed onto the consumers, the consumers who are struggling.”
Doty responded by saying, “Larger corporations and the wealthiest Minnesotans definitely would pay an additional tax. They would bear a part of that.”
Plan also includes regressive taxes
The other sizable tax increase proposed by Walz don’t appear to allow as much shifting. The capital gains assessment and the fifth bracket for high earners are not taxes that can easily be shifted to customers or workers. But there were complaints Thursday by some members of the Senate Taxes Committee that the capital gains surcharge could hit farmers and small business owners when they sell in order to retire.
[image_caption]State Sen. Bill Weber[/image_caption]
In his response, Doty returned to a message he repeated several times. “The governor is asking those who can do and who can pay more to do that for the greater good of our recovery and bringing the recovery back stronger.”
But it wasn’t just Republicans who raised questions about the tax plan. Sen. Ann Rest, a DFLer from New Hope and the ranking minority member of the committee, said she shares Weber’s concern about the capital gains surcharge. She also said she expects the February forecast will increase expected revenues from current tax rates and asked whether Walz would use that money to reduce his tax plan or increase new spending.
“I certainly hope that it’s going to be fewer taxes,” Rest said.
Walz’s plan also taps two other sources that are considered highly regressive, in that they hit lower-income people proportionately harder than wealthier taxpayers. Those proposed hikes — a new charge on vaping devices and a cigarette tax increase from $3.04 a pack to $4.04 a pack — would together raise $152 million over two years.
“The two most regressive taxes … are lawful gambling and the cigarette and tobacco taxes,” stated the 2019 tax incidence report.
Walz acknowledged that those taxes would fall more heavily on lower-income people, but he also said they are designed to incentivize behavior. “That’s no surprise,” he said.
[image_caption]Revenue Commissioner Robert Doty[/image_caption]
Doty also tied the vaping and cigarette tax hikes to COVID-19, saying African Americans and Native Americans are targets of cigarette marketing and that smokers have worse outcomes if they become infected with the novel coronavirus.
Live by the incidence study, die by the incidence study
Much of the criticism of the tax plan, especially the corporate income tax and the sin taxes, are based on the tax incidence studies done by the state. Though a master study is done every two years, more specific studies are done on actual tax proposals made by governors and legislators. The report on Walz’s new plan isn’t expected until April.
But two years ago, a study of Walz’s first tax bill highlighted its regressivity and empowered opponents to claim it would hurt poor people. That was a much-different tax proposal than the current plan, in that it included both a large gasoline tax hike and a renewal of the health care provider tax. But the reaction did show that government studies, once a common tool of liberals, had become one favored by conservatives.
“For years, the tax incidence findings have been an invaluable political asset for progressive interests,” Mark Haveman, the executive director of the business-leaning Minnesota Center for Fiscal Excellence, wrote after that damaging 2019 study was released, in an article titled: “Tax Incidence Karma.”
“The breakdown of effective tax rates demonstrated that lower-income households paid proportionately more of their income in taxes than higher-income households – allowing Minnesota’s tax system to be deemed ‘unfair,’” Haveman wrote.
“But now things have changed,” he continued. “The problem is that the media and the public have now long been conditioned to treat these incidence-derived tax burdens as the last and only word on ‘fairness.’ Meanwhile, having been bludgeoned by reporting on tax incidence for years, conservatives are absolutely relishing in the ability to give their political opponents a taste of their own medicine.”
Disagree that instituting a tax increase on corporations is going to affect costs for consumers. Personally, I believe they’re just blowing smoke.
I do not understand why we hesitate to make the wealthy pay more, as for many, they pay few taxes and could care less if their workers need govt assistance to survive. To much is given, much is expected.
To much is given, much is expected? Which page is that found in the DFL playbook? Why should someone be taxed more because they’ve been successful at their chosen profession? Or the farmer who would like to sell the farm so they can retire after a lifetime of working day-in, day-out? It’s not the farmer’s fault that their land sells for $10,000 acre at an auction or any other kind of sale. Why should they be taxed more for not having a say in what the land sold for?
You say the corporations are just blowing smoke about passing along increased taxes to the consumer. Have you ever ran a business that has stockholders to answer to, stockholders who expect some kind of return on their investment? If said corporation was to eat the increased taxes and don’t return the dividends the stockholders expect said corporation leaders could be out looking for new jobs or the stockholders sell their stock, dropping the value of the company, which in turn would lead to job layoffs and the like.
People who control more wealth and the people with the privilege of owning property have a corresponding greater ability and thus responsibility to contribute to the public good.
Not to mention investments in stocks fund many corporate and individual retirement income plans.
The vast majority of the stock market is owned by the uber wealthy.
Why should someone be taxed more because they’ve been successful at their chosen profession?”
“Or the farmer who would like to sell the farm so they can retire after a lifetime of working day-in, day-out?”
The short answer is these folks benefit more from Government and should pay their fair share.
While these standard issue Republican complaints sound lovely they ignore several things, the main one being that none of these things happen in a vacuum. The successful professional didn’t get there without using public resources, either they or the company they work for are using, what we used to call, the Commons. Commons are things we all pay for, like Education, Sewer, Water, Roads, Law Enforcement (The Courts and Police) Fire Protection, the Military, etc. Wealthy folks are much more likely to used some or all of these things to a greater extent then their less “successful” brethren. Their larger homes use more water, new roads were required to get into their gated communities, they tend to use the courts more often, (Law Suits, Long Ugly Divorces, Property Purchases, Protecting their errant children from the consequences of their actions), Fire Protection for their multiple properties, (contrary to popular opinion you property taxes don’t cover all this) I could go on, but the point is the Republican line ignores these things.
As for Farmers, it typically goes something like when farmers die they have to sell everything just to pay the “Death Tax,” back during GeeDubya’s term there was a search for this Mythical Farmer, very few if any were found. But the idea that this poor farmer is being penalized by paying taxes on his windfall land sale ignores, again, the cost his farm has had on society. For proof of this all we have to do is look to the southern tier of our state. Due to Agricultural runoff/pollution there are no swimmable lakes or streams in the ENTIRE South Western corner of the state. Its so bad in fact that every summer dogs are dying from simply doing what dogs do, going in the water. Small towns are paying, with help from the state, huge amounts to clean drinking water and rural residents can’t drink water from their wells. Shouldn’t those who created this situation help to pay for it? Let us not forget farm subsidy programs, CRP (paying farmers tens of thousands a year, NOT to farm), tax deferral and reduction programs like Green Acres.
I grew up in farm country. We were all poor, farmers and nonFarmers alike. Now 40 years later, after decades of paying very little in taxes and collecting subsidies and government checks these “poor” farmers have sold the family farms to developers for Millions of dollars. I really have a hard time feeling bad for them paying a little more in taxes.
Dang it Henk, I shoulda read yours first…
Great minds, eh?
1. That wealth was not generated in a vacuum, it was generated as a part of and because of a stable, productive society. It was created by the hard work of countless others, some compensated, some not. Most importantly it was created in no small measure due to the actions of blind chance, pure luck, and as such was itself the reward for its creation. Why should we bestow upon those, who’ve already benefited from the consequence of good fortune, even more of the same fortune, while others struggle on through challenges caused by no action of their own?
2. There is no requirement to take one’s company public, nor any guarantee that one will be shielded from the consequences of such action.
3. Job creation is not the sole province of the already successful. Should folks find themselves in the situations you cite, opportunity may arise for others, currently locked out of the market to replace those fallen by the wayside. I believe those of a conservative bent like to label it “creative destruction” when it applies to everyone but themselves.
The simple truth is that Minnesota fares much better under the Democratic control of the Governorship and at least one of the two State Houses. Looking back to the disastrous Pawlenty years we saw huge deficits, crumbling roads and bridges and the foolish idea that additional fees were not taxes.Today we have a Governor that is not positioning himself for National office and it shows . Compared to the Republican control vs Democratic control Minnesota is far better off today. Statistics bear this fact out. Today’s Republican Party is a shadow of its former self. Long gone are the days when principled men and women belonged to the GOP. The Durenburgers, Boschwicz ‘s and Anderson of the past are no longer but replaced with unhinged and mentally unstable types such as Bachman, Gohmer, Getz, Jordan ect…
Framing it as a moral issue when it’s not is naive, at best, and in many cases disingenuous. A lot of wealth is not “earned” de novo by the individuals who possess it. Essentially, most of the wealth is earned by those who are already wealthy. That is, they earn more money because they have more money, not because they provide more value or work harder or possess unique skills. While few millionaires inherit a significant amount of their ultimate wealth, a significant amount of wealth is inherited, and more importantly, a significant amount of wealth is the direct result of early advantages (e.g., education, access to opportunities, name recognition, social training, etc.) rather than just plain old elbow grease. It’s always fun to hear those stories about how the kid who grew up on government food subsidies became a millionaire by sheer grit and miserliness. But it’s rare. That’s not to say that those who were born on first, second, or even third base didn’t contribute to their ability to reach the home plate. Certainly, those who took advantage of the opportunities presented to them earned SOMETHING. But here’s the rub, when you’re born on third base, you almost never end up on first base without first scoring–people born rich almost never move to the bottom socioeconomically no matter what choices they make in life. What’s my point? The advantages inherently afforded to children born into higher income families are not earned by those children–they are received. Importantly, infrastructure that is supported by the whole of society more frequently benefits the rich. Think about air transportation safety, shipping standards, and the judicial system. That is, wealth is not about morality. Taxation should reflect the relative value that an individual derives from society and the relative value that the individual puts back into it. And don’t start with the “employer” argument. If you employ 10,000 people but they all require government assistance to afford shelter and/or food, you are net suck on society.
You should not look at the situation as having to pay more because you succeeded in life,what about some Companies that have alot of employees that actually helped put you where you are just because they work under you does not mean you should look down on them because they didn’t succeed in life as you have but look at the situation as human beings helping other human beings look at it as helping those that work or have worked hard to put you where you are should you turn your back on them and say deal with it however you can it isn’t my fault you didn’t finish school and take up a good career have you ever thought that alot of us lower income citizens didn’t have a say so on finishing school going to College becoming a successful Attorney ,Doctor etc because one of our parents died before their time and we had to work at 11 yrs old as a waitress in a cafe just to help support our siblings we do not have a say so in our lives at that age so don’t judge unless you know the situation.But what I am trying to say it isn’t your fault alot of us didn’t have the luxuries of going to college but instead work for a person just like yourself always knocking down the ones that put you where you are none of us asked for this horrible Pandemic I speak for myself I lost two very close relatives so no none of us asked for all this all we can do is keep moving forward and hope and pray people like you stay out of our way all we want is to move forward MN it expect more but we have no say so in sky rocket prices we have no say so on our health just because we recieve our fixed income check every month on time our health takes turns for the worst many times without notice to be prepared making us pay for childcare for two out of pocket just to be able to be admitted into a hospital for emergency surgery having to leave the hospital days before time because our fixed income doesn’t care whether emergency circumstances arise without notice kids have to do distance learning which means way more food than we have enough for so many things pop up in our faces so just because some if us recieve a check on the same day every month doesn’t gaurantee nothing will arise up unexpectedly without notice.You have a wonderful successful life pray for yourself in church or in a closet alone then look in the mirror
The State recognizes this exact issue with people who rent their homes: ultimately they are bearing the cost of property tax ostensibly borne by the property owner. In recognizing that fact, if you’re a renter below a certain income threshold, you have the right to a property tax refund every year. In my case, I am refunded about $300 every year for property taxes I’m not technically liable for as a non-property owner, but which my landlord absolutely bills me for in rent.
Just do that for this. Make it make sense.
Let’s call this what it is, politicians – all of them at last count – use faction competition to drive their agendas and “have vs have-not” is the oldest in history.
Probably because it’s abundantly clear throughout history that there are literal haves and have-nots
Pro tip: the haves are winning, and have been for several decades now.
Me thinks they have been winning like forever, otherwise they would be have not’s!
The gentleman who states corporations will not pass on the cost to consumers obviously never owned one. I did and yes I did pass on those costs. When you own a business you job is to survive. Something Walz and his cabinet members have never done. When your background is in the public sector, I do believe your outlook on business is somewhat clouded. Many businesses are corporations ( limited liability ) for a host of different reasons.
But if you follow the Walz line of thinking, they are all “wealthy” so they can afford to “pay more” Until they can’t. Then they go under. Like many of the restaurants, gyms and recreational facilities this past year. So within weeks of opening, you’re told you’re taxes are going up.
I sold my businesses and never looked back. Thank God I did, I’d be barely hanging on after all of this. Gov Walz is tone deaf. The worst economy is decades and the first thing he does is raise taxes on business owners. I hope people vote him out, I really do. BTW, I’m a registered Democrat.
Well said
I am not a fan of Ron DeSantis. He, along with Rick Scott have done a lot of damage to florida residents, as well as the environment. I did not vote for either. The only good thing he has done is push the vaccines into the communities. I like a lot of things about Minnesota, but i think the governors continued executive powers is wrong. As you well know, Minnesota is in the top 2-4 for taxes 9 ( income, corporate, commercial property ) in the country. Oh, and they do tax social security income. That’s pretty cruel. People are leaving Minnesota for lower taxed states. This is a fact, not to be confused with an alternative fact. Just sayin
Just an FYI on Ron DeSantis:
His initial vaccination plan included a partnership primarily with Publix Food Markets which underserves minority neighbor hoods and now we see the heiress to Publix provided $300,000 to the 1/6 Trump protest / insurrection.
If she “funded it” she should be liable for damages in a more perfect world…
Never waste a good crisis.
Walz is advancing his budget under the Clovid relief banner. But there’s more new spending in it than Clovid relief. And what happens when the need for assistance to those hit hardest by the pandemic passes? New taxes aren’t going to go away.
Minnesota has a history of responding to economic downturns (recessions) with “revenue enhancements” – increases in various taxes and fees to reduce the need for spending reductions. The “crisis” passes, but the “enhancements” remain – creating surpluses, which are promptly spent on new or expanded programs. In turn, that higher level of state spending fuels a search for even more “enhancements” when the next economic downturn comes (as it always does).
I’m not sure what information this article is giving. Of course business taxes are shifted as the market allows, and of course we ought to look at tax incidence. It would be useful if the article contained some figures, but all it does is state and restate the fact that tax imposition is different from tax incidence. As a side note, I don’t see how a tax incidence study showing a tax is more regressive than it looks gives progressives “a taste of their own medicine” … seems to me it supports a progressive argument to adjust the tax structure so it doesn’t just look less regressive, it actually is less regressive.
Also, tax incidence concerns matters of equity and ability to pay, but other considerations drive taxation, including correcting market failure. For example, a gas tax is regressive, but serves in part to correct the subsidization of motor vehicle use that causes excessive driving. Studies have concluded that to internalize social costs of motor vehicle use, gas ought to cost upwards of $12/gallon, and that doesn’t even account for our huge military budget, most of which goes to securing fossil fuel access, or the rather large cost of civilizational collapse due to climate change. Here, the cure to a regressive tax isn’t to continue to subsidize driving, it’s to make other social changes so that over time there are fewer poor people.
Well said, and thank you for saying it.
So looking from the other side, what should we not do? No Rural Internet, reduce our kids education, throw the homeless out in the street, get rid of the State Patrol, shut down the State Park system, stop repairing roads bridges etc. let all the criminals out of the prisons, dump the AG in let the frauds and hucksters have at it with the populous. “What don’t you want”
PS: I also ran a business (global no less), no you cannot pass your costs on all the time, especially in a competitive market place, you have distribution contracts, customer contracts, global competitors, dollar fluctuations, currency exchange etc. etc.
What was the point of this article, MinnPost? Of course corporations are going to raise prices to offset costs. That’s how business works. While I was reading the beginning of this article, I was thinking, “Who the hell else is Walz going to tax besides the rich and corporations? Smokers?” Turns out: Yes!
In an article like this, it might help to remind the public that state taxes pay for things like roads, schools, food aid for the unprecedentedly unemployed masses, small business aid, etc. The state is once again presented as a monolithic force that gobbles up money into a black hole.
I’ve been driving around the state a lot since my life got upended by Covid and whenever I’m on a rural road, I’m reminded that Tim Pawlenty once proposed ending the practice of painting white lines on the edges of roads next to the rumble strip to save the cost of the paint. Thank God for Tim Walz and his sensible, progressive tax policy.
As someone who used to have a small business, we didn’t raise our prices when there was a tax increase. We have to look at what our competition does so we can compete.
Always remember that Democrats in the metro have to work extra hard so that their taxes can subsidize Republican voters in outstate Minnesota.
Another Slogan and not science.
If you look at our highway system regarding metro vs rural…the metro pays more in taxes than rural, but receives less than rural. In other words the metro areas do subsidize the rural areas.
Sorry Ron, you are wrong and Pat is correct. Rural areas are welfare areas. Roads, schools and nursing homes are the three big items. All you have to do is look at the state budget, revenue sources and spending .
Adding to Pat Terry’s comment: Let’s not forget that in 2020, 40% of American farmers’ income was in the form of direct subsidies from the American taxpayer–even those at the economic bottom pitched in (the situation resulted from Trump’s disastrous trade wars with China). So, let’s not cry for the farmers who might be taxed a bit extra on the sale of a really sizable farm.
Plus, there are ways to “‘diddle” a law on high-income tax surcharges to take care of that problem.
I just think about those corporations that are hurt by the taxes I pay. In reality, corporations pay the taxes that I pay. Why if my income were tax free, think about how much more I would spend, spending that those down trodden corporations would love to have as revenue.
If the state just eliminated taxes on those of us who earn under $100K/year, our economy would boom.
See how that works?
Actually if people received better than livable wages, had an affordable life, with affordable healthcare, the economy would boom.
In the 50s, 60s, and 70s, a low wage worker could own a home, be a single wage earner family, own a car and be able to afford all forms of healthcare. Today, that’s not possible and we have some of the worst wealth inequality in the world with some of the most millionaires and billionaires in the world.
We also invested in our infrastructure which provided excellent middle class jobs, something that is difficult to get repubs to support.
A household that makes a million dollars a year cannot afford to pay $8000 more in taxes? Show your math in your explanation. Fact is that they don’t want to and they have bought the Republican Party in the attempt to avoid doing so. And some claim – as business owners, we are going to close up here, lay employees and move out of state to avoid paying taxes? Do the words self-centered and greedy apply? Also poor at math, given the moving costs, and that you are walking away from all your social connections – and Minnesota healthcare.
On the other hand, the media is not making this story about lowering taxes on a million Minnesotans who are struggling the most during the pandemic and tough economic times. For these people, whose minimum wages are not really enough to support a family, Republicans oppose requiring employers to pay more, meaning that government funded by middle income tax payers fill in the gap. Let’s talk the truth. Republicans would love to cut all expenditures on services that those with kids at home and the lowest income use the most. As they proclaim how pro-life they are, they want kids to be born, even into poverty, but once born, they are not really pro-child – as in putting Minnesota child above themselves when it comes to paying taxes.
The rich in our society have a lot of money. Their taxes have been cut substantially in recent years. We have a progressive income tax, but the progressivity stops – which the merely affluent have the same tax rate as the very rich. In fact, if you looked at the actual percentage paid, I suspect many with a high six figure incomes pay a higher percentage than the very rich, although the reports on taxes paid never ever shows this details for the top 5%, 1% and 0.1%. Republicans have never seen a income, estate or capital gains tax they like, and actually have a preference for flat taxes, fees and fines, not based on income and as in payroll taxes capped. Every Republican proposal seems to have a “what is in it for me” calculation.
What about the seniors who are thinking of retiring in Florida? Raising tax rates is just going to push more of them to switch their residences to states that don’t have income taxes. The end result is that the state’s total revenues could actually drop after the tax rates are implemented.
You can’t just talk about what is fair and who has the ability to pay. You need to pay attention to the competitive environment with other states who have significantly lower tax rates. With lots of people now working from home, this is going to be an even bigger challenge, not just for older people nearing retirement age, but also high earning younger folks who now have the flexibility to move to lower cost states.
I have lived in some of those lower cost states, and spent time in others. Arkansas, Kansas, Oklahoma, Utah, Nebraska, North Dakota, Kentucky, and Louisiana. Frankly. I was very glad when I could move back to Minnesota, even when it meant paying more in taxes. You get what you pay for. Also, I don’t think it is unreasonable for those in the highest income brackets to pay more. I wouldn’t worry about them being disadvantaged. They have access to a tax system that rewards those with the most political influence, and best tax lawyers.
I noticed that you don’t include Florida and Texas in the low tax states you have lived in. Neither have an income tax. Both have their act together and can easily compete with Minnesota. Just look at all the businesses fleeing California for Austin TX.
I am in SW Florida for the winter. I just got my 2nd Covid shot last week. If I was in MN right now, it would probably be at least another month or two before I got my Covid shot. You DO NOT necessarily get what you pay for!
Mike, there are lots of us paying Minnesota’s relatively-progressive tax rates who say “Goodbye, and good riddance!” to those Minnesotans who would move to a no-income-tax state somewhere, just to avoid paying income taxes here, or high property taxes.
Besides which: the whole the-rich-will-move-away argument is a canard. They don’t, at least not in large numbers.
I can understand not wanting to face big snowstorms in old age and thus moving to a warmer state that thinks paying taxes is for “losers.” But, to have great wealth and refuse to share it to improve the lives of other Minnesotans, and therefore move out?
Who wants that kind of non-constructive resident? High taxes, high benefits to the public good–that’s a choice we Minnesotans are glad to make.
“What about the seniors who are thinking of retiring in Florida?”
They will come back here when the weather is better and kvetch endlessly about how unfair it is that their favorite gyms and restaurants aren’t open. Come to think of it, they will do that even when they aren’t in Minnesota.
Great article. I hope he follows up with an article on the Laffer Curve.
One only has to look what is happening in California and New York and wonder why Gov Walz is going in that direction.
The 1% are leaving and taking their businesses with them.
You can only smack the golden goose with a 2×4 so much before it stops laying golden eggs.
It was great having a real economic article on MinnPost.
hilarious! THX!!!
Look at what is happening in California and New York. I took a look. California (#1) and New York (#3) account for 23% of the economic activity in the USA. They’re both growing faster than #2 Texas.
https://en.wikipedia.org/wiki/List_of_states_and_territories_of_the_United_States_by_GDP
https://www.bea.gov/system/files/qgdpstate1220.png
Please name 5, that’s all I’ll ask. You can even compare notes with Mike. What’s more I’ll even spot you the 2 you already have copied to your clipboard, Tesla and HP, you only need 3 more!
Thanks for shedding some light on the misinformation that is constantly used by the left in their “tax the rich” slogans.
The truth is – the rich do not have enough money to satisfy the trickle down goals of the big government ideologs. In order to sell their tax increases they revert to slogans and refuse to deal with facts.
Another MinnPost columnist would call this “tax the rich” slogan a bunch of “Lies,” but the “L” word is only reserved for the GOP.
What a great state and country we live in, they pay me $5680 a month to do nothing. You can delete this post, but it doesn’t change that fact. Why is it that liberals, especially the liberal media is so quick to censor the free flow of communication? Reparations? College loan forgiveness? fine with me, I’m not going to pay for it, being a retiree, it’s all going to fall on the young people that seem to clamor for it.
Kinda like that gub’mint teat you’ve latched on to. It’s almost like a stable, successful society takes care of it own? Whoda thunk it?
Mr. Callaghan, “tax shifting” is not a real thing!
The corporate income tax is not a business tax. It is not an expense, or a business “cost.” It exists only below the bottom line: it applies only to the profit that an owner can pocket as personal income or choose to reinvest. It is not “passed on” to anyone else through the magic of “tax shifting.”
Some taxes really are business expenses, such as sales tax or the commercial property tax. Like your cost of goods sold or the wages to your workers, they must be paid before you can take profit. They enter above the bottom line, so their primary effect is on the business itself.
This term, “tax shifting” sounds like an actual dynamic, but it’s wonderfully vague and difficult to pin down. It obliterates the distinctions among primary, secondary and tertiary effects. That’s what makes it an effective propaganda term. Yes, a tax anywhere in the economy eventually ripples out to effect other parts of the economy because the economy is a system and money circulates. But tax law can deal only in primary effects.
If our legislature decides to raise my income tax by a few bucks, the primary effect is on me. I may or may not then decide to skip a visit to the local coffee shop. (That’s not the government’s decision, it’s mine.) If I do skip it, the coffee shop gets slightly less gross revenue, but that’s a secondary (and much weaker) effect. Any effect on the coffee shop’s workers and suppliers is the responsibility of the coffee shop owner, (not mine,) and is a tertiary effect. An effect on the coffee shop owner’s profit would be a quaternary effect. My income tax has in no sense been “shifted.”
Tax incidence reports may (or may not) include solid calculation, but the theory and interpretation is just a mess. It’s mostly a bunch of econometric-sounding mumbo-jumbo. The tax incidence reports put out by the Minnesota Department of Revenue are in fact highly political documents, and should be read only as such.
Tax policy creates primary effects. Secondary and tertiary effects are the decisions of other actors farther down the causal chain. They are indirect and “incidental”. A tax on profit is not at all the same thing as a tax on workers, suppliers or customers. It cannot be shifted. The primary effect of the corporate income tax applies only to the income available to owners. Discussion of “tax shifting” is is nothing but an attempt to confuse this point. It’s just propaganda.
Thank you for providing a nice, direct rebuttal. There are always secondary effects to every decision, but their existence doesn’t necessarily negate the primary effect. Secondary effects of a “tax on the rich” may affect those that are not rich, but the primary effect (and primary benefit) will be the tax on the rich. That said, tax policy should generally encourage investment back into business rather than extraction of value. If we were to more holistically approach taxes that way, we might be able to deal better with market volatility, wealth disparities, and unemployment.
The fact that corporations spend millions of dollars every year fighting corporate taxation attempts should tell us exactly who the tax burden actually falls upon. If corporations were actually able to pass on all of these additional taxation costs onto their consumers as they claim, they would would never fight these measures tooth and nail as they do. They are merely trying con their customers into thinking that their increased taxation is paid for with their patronage.
The title of this article is a bit misleading. The first line of the third paragraph tells us that, for the most part Walz’ plan does what it says it will: “And to a large degree, it does….”
But then it gets to the picking of nits: Sin taxes have always been known to hit the poor hardest. We’ve been doing them for a long time, but why? Simple answer, they are easy, whose against taxing things that are harmful? They are necessary because our tax system is messed up, thanks to Republicans attacking any new tax since the days of St. Ronald Reagan, (Maybe Donald has replaced him as the patron saint of Republicanism?) the tax burden in this country is falling more and more on working people.
This brings me to the other nit this article picks. The Corporate tax component. In my opinion the article does a poor job of explaining it but the gist of it is that consumers will be paying higher prices, we’ll ignore the lack of support for this contention, accept that its true and ask how much of the new tax will be pushed to consumers? The article doesn’t say. So, a portion of the Plan will be a corporate tax and some, unknown, portion of that may or may not be passed to consumers. Super, that’s a nice way to rile up the populace and maybe that’s the point, but lets be honest, the amount passed on may be totally unnoticeable to anyone but the nit pickers.
In the last 60 years the share of federal tax revenue paid by corporations has fallen by two thirds, from 32% in 1950 to 10% in 2013. We all know we haven’t cut spending by that 22% reduction so whose paying that extra amount? If you guessed the average American worker, you’d be correct. Its not always obvious, we pay fees and sin taxes and a myriad of other things to make it up, but at the end of the day we pay that 22%.
Henk, not to get cross wise, but we got this thing called the federal deficit? Which is now what ~ 7-8X of yearly GDP, hell of a way to run a house hold! But states like MN can’t operate at a deficit, well, unless you are a “R” then there are all kinds of gimmicks and tricks to steal from Peter to pay Paul.
I realize that the article was about the state and my adding the Federal at the end may have confused things, but the state and federal are not unrelated. Our friends the Rs have been reducing federal help to states for a long long time. Most recently the ****p administration was found to have been lobbying the Senate to block Covid aid to the states, but we can look all the way back to the 1975 Special Education Law that the feds have never fully funded. That’s money the states have had to make up. Here in Minnesota we’re further disadvantaged because we are a donor state that gets far less from the Federal Government than we send in.
Just excellent . Thanks.
Paraphrasing Gov. Rudy Perpich: You can move to South Dakota, but when you wake up, you’re still in South Dakota.
It’s a great state to live in if you don’t want to be burdened with a big paycheck.
Isn’t their unemployment rate now lower than it was before the pandemic too?
Yet the truth continues. I’m glad that there are some Americans able to go to work and support themselves, their families, and their economies.
Yes. If 1 in every 500 residents has died (yep, true), there might be a few job openings available.
I grew up in South Dakota. I will never move back to South Dakota. The moment I no longer have relatives living there, I will do my best never to give it any business. No opportunity, no opportunity for opportunity–working as intended.
I actually think Democrats make a big mistake when they introduce plans to tax the rich. This invites accusations of class warfare and I think it strikes people as unfair, even though it’s way less unfair than the current tax structure.
I think we’d be more successful with a plan that gives everyone some skin in the game, after all, we are ALL responsible for the fiscal conditions and crises we end up with. If I was in charge, I would propose a tax increase across the board, but weigh it more heavily on the wealthy. I would talk about everyone needing to pay their share, I think rhetorically you get more buy in that way, frame it as a shared sacrifice that pays off for everyone rather than a targeted sacrifice that redistributes wealth. You can still talk about the wealthy paying their fair share, but that happens in the context of everyone paying their fair share to resolve a collective problem. Now understand this is just about messaging, I’m saying you collect just $5 more from the poorest taxpayers and raise taxes on the wealthy however much Walz or whoever is proposing, but that universal buy-in from everyone gives everyone a place at the table in terms of pulling together.
Of course Republicans will always re-enact their tax debate game, but for some reason Democrats never short circuit that with simple demands for specificity. Republicans always describe an imaginary universe where businesses and families deliberately reduce their income every so often to they can presumably revel in the practice of tightening their belts. The comparison has always been daft, but you’d think Democrats have NEVER seen it before and haven’t had decades to formulate a response.
By the way, sure spending has increased for ten years, that’s because we’ve been trying to repair all the damage Republican budgets did before Dayton got elected, we’ve been dealing crises that required emergency spending, and an inflation thingie that happens almost every year. If you think it’s grown too much, fine- show us exactly where you think its grown too much, and what and who’s services you want to cut and by how much. Don’t just show up at the table with stereotypes about big govment and spending and expect a rational budget to emerge.