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Under Governor Dayton’s 2018 tax proposals, Minnesotans in every population decile would see their taxes rise. Furthermore, the biggest hikes would be imposed on those on lower incomes.
These are the findings of the Minnesota’s Department of Revenue’s incidence analysis of the proposals which was released on Monday. The analysis can be read below.
[embeddoc url=”https://files.americanexperiment.org/wp-content/uploads/2018/04/hf4385_Incidence.pdf” download=”all”]
Chart 1 shows the impacts for 2018. As the Department of Revenue writes, with Gov. Daytons’ MinnesotaCare Tax Extension Bill
“The tax burden rises by $635 million, with increases in all deciles. The effective tax rates rise by more in the lower deciles and less in the higher deciles. All deciles except the top decile see the effective tax rates rising by more than the average for all households (0.25%). The Suits Index for the provider tax increase is -0.325 (quite regressive). It makes the tax system more regressive, raising the tax system Suits Index from -0.0158 to -0.0223.”
For example, for the 10% of Minnesota households who have annual incomes below $13,418, the tax burden will rise from 25.0% to 25.8%, the highest of any of these categories.
Some of this is offset by Gov. Dayton’s tax bill. This, according to the Department of Revenue,
“…changes the burden from B to C. The bill increases the overall tax burden by $92 million, raising the effective tax rate for all households combined by 0.04%. The changes by decile are much larger. The effective tax rate rises by 0.16% in the top decile. It falls for all other deciles, with reductions of 0.10% or more in 4 of the bottom 5 deciles. The bill is highly progressive, with a Suits Index of +2.0377. It raises the tax system Suits Index from -0.0223 to -0.0160.”
But the reductions in the overall burden in the tax bill do not offset the increases in the overall burden from the MinnesotaCare bill. If both of Gov. Dayton’s bills were passed in their current form, the 10% of Minnesota households who have annual incomes below $13,418 will see their tax burden increase from 25.0% to 25.6%, the highest of any of these categories. As the Department of Revenue puts it, “the resulting system would be just slightly more regressive”.
When Gov. Dayton announced his tax bill in March, his office reported that “The Governor’s 2018 tax bill prioritizes low-income and middle-class families across Minnesota, just as he has for his entire term as Governor.” His own Department of Revenue says otherwise.
John Phelan is an economist at the Center of the American Experiment.