Tax the rich? Done. Chase them from the State? Done.
Doug Tice at the Star Tribune shed big light on the consequences of Governor Dayton’s crowning achievement. Minnesota now has the most progressive (small “p”) tax system in the country. His Sunday commentary was entitled, “Tax the rich? Done. Tax fairness? Well…The gap between the income tax burden on the high earners and others is now greater than any other state.”
There are a lot of good observations in the piece, well worth the read. Here are a few:
Among the 42 states that have state income taxes, Minnesota imposes the lightest “burden” in America on a married couple with $35,000 in income. But it extracts the heaviest burden in America on a single senior citizen with $75,000 in income.
The truly rich in Minnesota face high income tax burdens, to be sure. But it’s worth noting that the state’s comparatively high income tax also reaches some whose lifestyles are less than fabulous.
That is because, as Tice points out, taxes on corporations are regressive because everybody pays them in higher prices (something no one learns in school) and the poor are hit harder by “sin taxes” like alcohol and tobacco, or taxes on gas.
What has Dayton achieved so far?
The total effective state and local tax rate on the richest 1 percent of Minnesotans (household incomes over $512,192) was 9.5 percent when Dayton was elected in 2010. It jumped to 11.5 percent in 2014 and will be 11.4 percent in 2019, the study projects….
So what has Dayton done with billions in new revenue?
The net effect is still that under Dayton, Minnesota’s tax system has become meaningfully less regressive. But it should be said that this governor has taxed the rich in order to fund government, not to reduce the tax burden on others.
That is worth repeating, over and over: “this governor has taxed the rich in order to fund government, not to reduce the tax burden on others.”
Tice just hints at what American Experiment has been shouting from all rooftops these last few years: people who pay taxes, whether they are the idle rich, working rich, middle class or working poor, can leave the state.
And they have been doing just that for years. In droves.
Memo to the DFL: If people do not reside in the state, you cannot tax them. The state loses tax revenue and the wealth effect of their spending and productivity. And that is just the revenue side: what about our culture and community?
And then there is population.
I know you have seen it before, and you will see it again. Here is Figure 4 from the State Demographer’s January 2015 report showing the migration in and out of Minnesota. We have got to reverse this trend, and quick.
In addition to the loss of our tax base to pay for Governor Dayton’s state, we are set to lose a Congressional seat after the 2020 Census.
Congratulations, Mr. Dayton.