High-wage earners would pay $1 billion more in income taxes, all Minnesotans would pay sales tax on pricier clothing and homeowners would see $500 yearly rebates under Gov. Mark Dayton's budget proposal, released Tuesday...
Business leaders objected to higher taxes on wealthier Minnesotans and on the services that businesses sell each other but some praised the increased funding for education and transit. And Republican lawmakers upbraided the governor for his heavy reliance on new taxes in a budget that cuts only $225 million in spending from a $38 billion budget.
Dayton, who campaigned in 2010 calling for the state to "tax the rich," would create a new tax rate of 9.85 percent, to be paid on taxable income above $250,000 for joint filers and above $150,000 for single filers. That would net about $1 billion from 53,000 returns and give the state one of the top five top rates in the country.
For the first time, Minnesotans would pay sales tax on clothing -- items above $100 -- and on services like haircuts, auto repairs and legal fees.
"This is a budget for a better Wisconsin," said House Minority Leader Kurt Daudt, R-Crown, implying that Minnesotans would run to Republican-led Wisconsin if the budget were passed as proposed. Dayton's campaign and governing mantra has stressed the creation of "a better Minnesota."
Dayton's plan would dramatically alter the state's revenue streams. Over time, the state's system has tilted toward the property tax, which supplies 40 percent of the state's revenue. Income taxes provide 33 percent and 27 percent come from sales taxes. The overhaul would ensure that each of the three sources provided roughly a third of state revenue.
A key question in all of this is what is the role of government. Should government take more resources to distribute them other people? It's easy to raise taxes on the wealthy but those are the folks who run businesses and their success financially is often a byproduct of their success in the market place. To hit them for higher taxes will discourage some from remaining in Minneosta or expanding their businesses if they're a business owner. These things will ultimately be a drag on the economy and job creation and a discouragement to work. I saw numbers that on the economies of state with no income tax. Over the last decade, jobs grew in these state by just under 5% while in states with income taxes jobs declined by over 2%.
The golfer Phil Mickelson recently questioned whether he could continue living in California where the combination of state and federal taxes will take an estimated 60% of his income every year. Is that a disincentive to work and be productive? Certainly.
Again, the push for more taxes is a sign people are thinking only of the short term and what they can get versus the long term and how these tax policies effect the economic environment. We're a society which increasingly has a very short term horizon.