No tax hikes this session
On Monday, May 17, the Minnesota legislature announced they have agreed on a $52 billion budget for the next biennium. As reported by the Star Tribune, The leaders of the…
A new report by the Minnesota Center for Fiscal Excellency just confirmed what we already know –– the rich in Minnesota are disproportionately burdened when it comes to income taxes.
In their new study, Minnesota ranked among the top 5 most progressive states after comparing tax rates paid by Married-joint Return filers earning $20,000 with fillers in the same category earning a higher income.
Married-Joint filers earning $20,000, in 2018, paid a rate that was 14.0 percentage points lower than of those earning $150,000; 14.9 percentage points lower than of those earning $250,000; 16.3 percentage points lower than of those earning $500,000; and 17.6 percentage points lower than of those earning $1,000,000.
Among the least progressive states –– one of which is our neighbor, North Dakota –– tax rate gaps do not surpass 5.0 percentage points, meaning high and low-income individuals pay close to similar tax rates in most of these states.
One major reason for Minnesota’s progressive system is due to our generous earned income tax credit (IETC) which effectively reduces the tax burden for low-income earners. States like California, since they offer only modest credits, have a slightly smaller gap in tax rates between high earning individuals and low earning individuals. However, after excepting the IETC, California joins the ranks as one of the most progressive states.
For Minnesota, tax rate gaps between $20,000 earners and selected higher income earners go down for all brackets selected after excepting IETC. Minnesota also slides down the ranks and is among the top 5 progressive states only when comparing Married-Joint fillers making $20,000 with those earning $1 million.
The Minnesota legislative session is poised to end next Monday and lawmakers are yet to agree on a budget for the next biennium. The good news, currently, is that Democrats are slowly coming around to the idea that tax hikes will not be necessary for this budget. This, however, leaves the window open for tax hikes proposals in the future.
But proponents of hiking taxes on the rich ought to realize by now that the rich in Minnesota already pay more than their fair share in income taxes, as the American Experiment has already shown before.