Tag Archives: soak the rich

About That “Soaking” Of Minnesota’s Rich

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For a long time, we’ve been hearing about how Governor Mark Dayton and DFL legislators “soaked the rich” back in 2013. That’s become the conventional wisdom at both the state and national levels, from both liberals and conservatives.

For example, at the national level, Patrick Caldwell from liberal Mother Jones magazine reported that Dayton ran on a “soak-the-rich platform of massively hiking income taxes on the wealthiest people in the state.”

Locally, conservative columnists Joe Soucheray and Katherine Kersten have long been beating the “soak the rich” rhetoricial drum, as has the conservative Pioneer Press editorial board:

“What’s the plan? Tax the rich, then tax the rich again, then tax the rich again?”

Finally, the Chair of the Minnesota House Tax Committee, Greg Davids, is among many conservative state legislators who have used “soak-the-rich” rhetoric to full effect.

Is the “Soak” Rhetoric True?

But did Governor Dayton’s 2013 tax increase on individuals earning over $150,000 and couples earning over $250,000 actually “soak” them in any meaningful way. This chart, derived from the Minnesota Department of Revenue’s 2015 Tax Incidence Study, calls that conventional wisdom into question:

MN_Soak_the_Rich_chart

This chart shows that the highest earning Minnesotans will only be paying a slightly higher proportion of their income in state and local taxes in 2017 than they did in 2012, under the rates in place before the 2013 tax increase. In 2012, the highest income Minnesotans were paying 10.5 percent of their income in state and local taxes. By 2017, the projection is that the highest income Minnesotans will see their state and local tax burden inch up to 10.7 percent.  This 0.2 percent increase hardly represents punitive “soaking.”

On a somewhat related issue, the chart also shows that the 10 percent of Minnesotans with the highest incomes look to be paying a much smaller share of their income in state and local taxes (10.7 percent) than the decile with the lowest incomes  (26.4 percent). However, on this point, the report contains an important caveat about the first decile data (page 17):

“…effective tax rates in the first decile are overstated by an unknown but possibly significant amount.”

But back to my original and primary point, which is not impacted by this caveat:  Despite all of the wailing and gnashing about the alleged mistreatment of the highest income Minnesotans, the impact of the Dayton-era tax increase on top earners’ overall state and local tax will be negligible.  Higher taxes on top earners didn’t cause the massive job losses that conservatives promised — Minnesota currently has the fifth lowest unemployment in the nation — and they didn’t soak anyone.

Don’t Forget About Local Taxes

How is it that Minnesota’s top earners are paying higher taxes, yet still are paying a lower share of state and local taxes than any other income grouping? Part of the reason is that the top 10 percent will only be paying only 2.2 percent of their income in local taxes in 2017, which is much less than the 3.1 percent share of local taxes that will be paid by the average Minnesotans, and less still than the share of local taxes paid by the lowest-income Minnesotans.

Impact_of_local_taxes_on_tax_burden_by_decileThis is a point that is frequently missed, or intentionally ignored, by people who focus solely on state tax burdens, without also taking local tax burdens into consideration.

So, did Mark Dayton really “soak-the-rich” when he increased taxes by $2.1 billion in 2013?   Inflated rhetoric aside, it turns out that the Dayton tax increase was more akin to a light misting than the predicted soaking.

Note:  This post was also published in MinnPost.

Why Wealthy Minnesotans Can Pay More

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Taxing millionaires.  Surcharging millionaires.  Raising the minimum wage.

For the casual observer who hasn’t done their homework, I can see how this might be confused with “class warfare” waged by mean DFLers intent on punishing rich people.

But here’s the thing about warfare.  You can’t take a quick glance at a battlefield and identify the aggressors.  For instance, an observer flying over Normandy Beach on June 6, 1944 couldn’t reasonably conclude “those mean Americans storming that beach down there are obviously wreckless war mongers.”

After all, what about the blitzkreig and Pearl Harbor, right?  You have to know at least a bit about the prelude to an event to be able to make informed conclusions about the event. Continue reading →

Dayton: Even a Flat Tax Better Than Minnesota’s Current Regressive Tax System

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Not so long ago, there was a strong national consensus in favor of progressive taxation.   In the 1980s, conservative Ronald Reagan was running around telling his followers:

 “We’re going to close some of the loopholes that allow some of the wealthy to avoid paying their fair share.  In theory, some of those loopholes were understandable.  But in practice, they sometimes make it possible for millionaires to pay nothing, while a bus driver is paying 10% of his salary, and that’s crazy.

…Do you think the millionaire ought to pay more in taxes than the bus driver or less?

(Crowd:  “More!”)

That was then, but this is now.  Now, conservatives call conservative Reagan’s pro-progressive tax position “socialism” and “anti-American,” a sign of just how radicalized Republicans have gotten in their desperation to pander to conservative talk radio hosts, wealthy donors, and Tea Party primary challengers.

Among the most radical things that Republicans now push is a flat tax.  While a flat tax is attractive at first blush because it is simple compared to the maddeningly complex federal income tax, it is the polar opposite of the progressive income tax that Reagan championed.  While a progressive tax is designed to take a larger percentage from the income of high-income earners than it does from low-income individuals, the flat tax takes the same percentage from everyone, whether you are a bus driver or a billionaire.

As the Founding Father of the modern conservative movement said, “That’s crazy.”

Yesterday in a Minnesota Public Radio interview, Minnesota Governor Dayton made an interesting point on this subject.  When asked what kind of tax reform he favors, Dayton said:

 I still believe in a progressive income tax.  But I sure don’t believe in a regressive income tax, which is what we have now.  …Conservative Senator Rod Grams was always talking about a flat tax.  Well that would be an improvement in Minnesota!  We have less than that now.

Ponder that.  A flat tax – which embodies the radical anti-progressive notion that conservative icon Ronald Reagan not so long ago mocked as “crazy” to the delight of his conservative followers – actually would be an improvement over the regressive tax system that Minnesota currently has on the books today.

Millionaire Mark Dayton is often characterized, by opponents and even by mainstream reporters, as favoring a “soak the rich” ideology.  That’s a silly characterization, because what Dayton actually proposes is not to “soak” the wealthy.  What Dayton recommends is simply a return to the common sense notion of progressive taxation supported by a strong majority of Minnesotans, and even the founder of the modern conservative movement.

 – Loveland