Gov. Walz is not proposing a flat tax system

Mankato Free press reported the following yesterday,

ST. PETER — With just a couple of weeks left to go for Minnesota’s regular legislative session, Mary Spear — an organizer for the “We Make MN” rally and leaflet distribution Sunday — wants residents in Senate District 19 to make a final push to press local lawmakers to support Gov. Tim Walz’s $52.4 billion budget proposal.

“Mainly it’s about getting the revenue to fund the programs that we would like to see happen,” Spear said.

Those attending Sunday’s rally at Gorman Park were particularly focused on clean energy, universal child care, and paid family leave. That means raising taxes on some of Minnesota’s wealthiest — corporations and individuals who make $1 million a year or more — to fund programs aimed at alleviating some of the social and economic struggles brought on by the COVID-19 pandemic.

This rally is very much in line with the ideas brought about by lawmakers regarding tax hikes – Minnesotans need to pay more in order to take care of people that have been heavily affected by the pandemic.

Minnesota of course already spends more on assistance programs compared to other states. In our report “Closing Minnesota’s Budget Deficit“, Minnesota in 2018 had the third-highest spending on welfare per person in poverty – 50 percent higher than the national level.

So, it should be obvious that increased spending is less likely to significantly improve outcomes among the disadvantaged. Evidence exists that economic growth is the most effective way to raise people’s incomes. And high taxes are anti-growth and therefore hurt low-income workers the most.

Putting that fact aside, however, there seems to be a confusion about taxes that is very telling of what fairness means to proponents of tax hikes –– the rich paying more.

“Just a flat, fair and open tax system so the wealthiest people are actually paying their fair share would go a long way in decreasing the rich/poor gap,” she said.

A flat tax system is a system where everyone pays the same effective rate. Gov. Walz is not proposing such a system––he is proposing to make Minnesota’s tax code more progressive than it is. The same is true regarding other proposals to raise taxes on the high-income-earning Minnesotans.

Fairness is subjective, therefore what is fair or not hugely depends on what side of the coin you fall on. But a flat and fair system where the wealthiest people actually pay their fair share–– in other words, more –– is something that can not exist, as it is contradictory.

A flat tax system treats everyone equally, while a system like the one Walz is proposing – where the rich pay their “fair share” – imposes a disproportionately higher tax burden on high-income individuals.

If fair is defined as the rich disproportionately paying more into the system, then Gov. Walz may indeed have the right idea. However, that tax system is not flat, and should not be called as such. Besides, the numerous high-income individuals being targeted as potential sponsors for extravagant government spending would object to such proposals being called “fair.”