August 03, 2006
Taxes in the News
A caller asks: Do "no new tax" pledges tie the hands of leaders who have to plan for the future?
Sometimes the answer depends not on political philosophy, but on level of government.
Endorsed candidates for governor say they won't raise taxes, but the state largely relies on funding sources — income and sales taxes — that rise when the economy rises. Local governments don't have that benefit; they must set a spending level and levy the tax to meet the budget.
In case you missed it today, this is part of the discussion on MPR's Midday. The program hosted David Strom, President of the Taxpayers League of Minnesota, and Minnesota state representative Paul Marquart (DFL-Dillworth), a leading member of the House Tax Committee.
St. Paul Mayor Chris Coleman posted a city budget cruncher tool to illustrate the challenge he faced. Yesterday, he proposed a tax increase as part of his plan to solve the city's $16.5 million budget gap. His finance and budget director, Matt Smith, answers questions in today's Pioneer Press.
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Also, in case you missed it, on the Midday program, Mr. Strom stated that state and local taxes are progressive.
This disagrees with our most recent tax incidence study, published 2005, which states that taxation in our state is regressive, that we are trending more regressive over time, and that the top 1% of our state's earners pay only 8.4% of their income to state and local taxes while the bottom 10% pay 16.3%
These figures do not include the recent stadium tax or the Governor's health impact fee, nor many other regressive measures that have been adopted over the past two years.
The central issue is not 'how much', though we clearly can no longer afford to provide the level of investment we would need to make Minnesota the best place to raise a family.
Rather, the issue is 'who pays'. Taxes raised on the back of the poorest taxpayers decrease class mobility and re-inforce the social and economic inequities in our system.
It is widely believed that taxing the wealthy at a rate proporational to the economic benefit they receive under the protection of the state would drive the best and brightest from our state. I would argue that if our schools were the best in the nation and if companies operating here did not have to bear the cost of health insurance, we would have a very high level of growth.
Besides, putting more money in the hands of a family with a household income near the bottom of the range spurs economic growth. Whereas the wealthy can hold the extra money waiting for a good investment oppurtunity, the poor will spend.
This spending 1) creates growth and 2) sends the money to the top wage earners anyway.
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This disagrees with our most recent tax incidence study, published 2005, which states that taxation in our state is regressive, that we are trending more regressive over time, and that the top 1% of our state's earners pay only 8.4% of their income to state and local taxes while the bottom 10% pay 16.3%
These figures do not include the recent stadium tax or the Governor's health impact fee, nor many other regressive measures that have been adopted over the past two years.
The central issue is not 'how much', though we clearly can no longer afford to provide the level of investment we would need to make Minnesota the best place to raise a family.
Rather, the issue is 'who pays'. Taxes raised on the back of the poorest taxpayers decrease class mobility and re-inforce the social and economic inequities in our system.
It is widely believed that taxing the wealthy at a rate proporational to the economic benefit they receive under the protection of the state would drive the best and brightest from our state. I would argue that if our schools were the best in the nation and if companies operating here did not have to bear the cost of health insurance, we would have a very high level of growth.
Besides, putting more money in the hands of a family with a household income near the bottom of the range spurs economic growth. Whereas the wealthy can hold the extra money waiting for a good investment oppurtunity, the poor will spend.
This spending 1) creates growth and 2) sends the money to the top wage earners anyway.
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