High tax rates ≠ high revenues
Lower tax rates incentivize economic activity and therefore expand the tax base. High tax rates do the opposite
When I write about Minnesota’s high tax burden, I often get one of two responses. One is to say that the measure I’m using is wrong and that our taxes aren’t actually that high. The second is to admit that we have high taxes here, but that they pay for a bunch of cool stuff our government does so its ok.
Leaving aside the latter point for now, what about the former, that our taxes aren’t actually that high after all? The problem with this is that study after study finds that they are. The latest comes from the Minnesota Center for Fiscal Excellence, which finds that our state has the 7th highest state and local taxes in United States. The report’s summary findings are:
Minnesota ranks 7th in the nation in total state and local taxes as a percentage of cash income. Both individual and corporate income tax collections rank in the top ten nationally.
Minnesota state and local governments continue to be less dependent on property and sales taxes than the national average – both ranking in the bottom half of the nation.
Minnesota’s above average tax collections are offset in part by less state and local reliance on federal government and other non-tax revenues. As a result total state and local revenues are 5.2% above the national average placing the state 22nd in the nation.
Minnesota ranks 10th in the nation in total state and local spending. Only one area — “public welfare” (i.e. health and human services) ranks in the top ten nationally — 85.9% above the national average.
In addition to HHS, state and local governments spend more than the national average on K-12 education, higher education, natural resources and parks, and police.
This confirms what we at the Center have said before, namely that Minnesotans are some of the most heavily taxed citizens in the United States and that our state’s welfare spending is also some of the highest.
These are the facts. You might think these things desirable, you might not. But let us embark upon that debate from a shared basis of fact.
John Phelan is an economist at the Center of the American Experiment.