The Minnesota Senate will likely pass their tax bill today, which includes $1.8 billion in tax increases and derives the bulk of new revenue from raising the state’s top personal income tax rate by 20 percent and imposing a 94-cent per pack cigarette tax hike.
Among the bill’s features:
- Increases the current top personal income tax rate by 20 percent (from 7.85 percent to 9.4 percent), with the rate kicking in at $79,730 taxable income for single filers and $140,960 for married joint filers
- Extends the sales tax to clothing and a variety of services including auto repairs and over-the-counter medication, while reducing the overall sales tax rate to 6%.
- Increases regressive cigarette taxes by 94 cents per pack.
- Modifies the formula and increases spending on Local Government Aid, which redistributes state tax dollars to cities with no strings attached
Similar to Governor Dayton’s original tax plan, the Senate increases sales and corporate tax revenues but modestly lowers both rates, allowing supporters to claim they are “cutting taxes” while state government takes in more money. In doing so, they undercut a widely accepted principle (and necessary precondition) of good tax reform: revenue neutrality.
And what ever happened to “taxing the rich”? The Senate income tax hike is not aimed at millionaires and billionaires, but middle class families and small businesses. Liberal policymakers continue to redefine “rich”; it started as “millionaires and billionaires”, then it was the top two percent of income earners (according to the Governor’s tax bill,) and now, according to the Senate, the top 7 percent of income earners are rich. This includes individuals with taxable income of about $79,730 or, in the case of married taxpayers filing separately, individuals with taxable income of just over $70,480. MinnPost reports: “The measure would affect 177,800 Minnesotans, who would pay an average of $2,435 more in income taxes, according to the Minnesota Department of Revenue.”
Ironically, the Senate majority caucus released their tax plan on April 23, which is Tax Freedom in Minnesota, the day in which taxpayers are supposedly done working to fund government for the year. If the Senate prevails with these massive tax hikes, next year Minnesotans will work a few days longer to satisfy the appetite of big government.