Northeast states start addressing the consequences of high taxes, making Minnesota more of an outlier
Today the St. Cloud Times published an op-ed I wrote on how Minnesota’s high taxes are becoming even more of an outlier as a number of states, including traditionally high tax blue states in the Northeast, move to reduce key taxes.
Connecticut is now exposing the limits of raising taxes. They’ve raised taxes three times since 2009 — most recently by $2 billion in 2015 — and the state is still facing a budget deficit this year. Democrats in Connecticut are finally coming to terms with the fact that the state’s high taxes have undermined their economy.
For space reasons, some key quotes from the Connecticut governor didn’t make it into my article. Understanding another tax increase will only do more damage, Gov. Malloy has been speaking at town halls across Connecticut to explain why the state must now start making some very hard budget decisions to cut spending. At one town hall in March (video) he said this,
We have raised taxes previously in my administration twice, in the prior administration once before she left office as well. We know it’s having an impact on our ability to attract business and jobs, which after all ultimately pay taxes and allow us to pay for the services that we want to acquire for our citizens.
Later during the town hall, Malloy put the problem more bluntly:
I’ve raised taxes multiple times. You know, it’s not working and it’s come up a cropper. And you know you can’t go back to the well. We’re already losing jobs. So, you know, what’s the right balance?
I’ll admit I’ve never heard the term “come up a cropper.” It’s an English phrase that means to “fall over or fail at some venture” derived from when people fell “neck and crop” off a horse. Apparently folks who sing Yankee Doodle as their state song are bit more connected to Old World phrases.
And now they are keying in to new world tax realities.
So are Democrats in New York, Maryland and Maine. All of these states have concluded high death taxes are driving wealthy people from their state and have begun increasing the value of the estates subject to their death taxes up to the federal level, now set at $5.45 million. More conservative states, including Indiana, North Carolina and Tennessee, have implemented even more comprehensive tax reforms that include the complete repeal of their death taxes.
This is making Minnesota’s estate tax and overall tax system even more of an outlier. Currently, Minnesota’s estate tax exemption amount is set at $1.6 million and will increase to $2 million by 2018. Despite this increase, Minnesota will remain one of the states with the lowest exemption amounts coupled with one of the highest rates.
With these tax burdens, no one should be surprised that — as American Experiment analysis of IRS data shows — Minnesota is failing to attract top earners. Hopefully Minnesota doesn’t need a Fortune 500 departure like GE to wake up to the need for lower taxes.