Why Minnesotans should be wary of Gov. Walz’s plan to hike taxes on the rich
Last year, President Joe Biden promised not to raise taxes on anyone making less than $400,000 a year. But just recently, the White House made a clarification that the $400,000 threshold applies to families and not individuals. That means individuals making over $200,000 will potentially be hit by tax hikes. Simply put, people were misled.
But even if the threshold for the tax hikes remained at $400,000 for individuals, there still remain other drawbacks to taxing the “rich”.
Taxing the very rich is not very profitable
Not only do the rich make up a small proportion of taxpayers, but they are also more responsive to tax hikes. More often than not, tax hikes that target the richest of the rich fail to raise the expected revenue. Sooner or later, the not-so-rich have to pick up the tab.
In Minnesota, for example, when Gov. Walz unveiled the Minnesota COVID-19 Recovery budget, he emphasized that no household making less than $20,000 a week will see their taxes go up. However, roughly 21,000 or 0.7 percent of all Minnesota households make over $20,000 a week. Walz’s tax plan will, therefore, narrow the tax base, making it less stable.
The rich change behavior in response to taxes
The rich are not just aimlessly waiting to be taxed into oblivion. This is why proposals to tax the rich have failed to bring estimated tax revenue.
For example,
Maryland created a special “tax on the rich” that legislators said would bring in $106 million. Instead, the state lost $257 million. Some of Maryland’s rich just left the state. When New York state hiked its income tax on millionaires, billionaire Tom Golisano moved to Florida, which has no personal income tax. “[M]y personal income tax last year would’ve been $13,800 a day,” he told us. “Would you like to write a check for $13,800 a day to a state government, as opposed to moving to another state?”
Minnesotans should be wary of Gov. Walz when he says his plan will only raise taxes on the rich.
The rich will move from Minnesota — as they have done time and time again — or find some other ways to reduce their tax burden. When that happens, the only way for Minnesota to afford ongoing programs will be to tax the not-so-rich, i.e., the $70,000 households.