21 thoughts on “Last Dance?

  1. Joe Loveland says:

    The dance continues…

    House Speaker Margaret Keliher responded to Governor Pawlenty’s movie reference (Friday the 13th: Taxes = serial murdering???) with a movie reference of her own:

    “The curtain is back, and the Wizard of Oz is standing behind the curtain,” she said. “It turns out he is a regular person who has no plan.”

  2. Newt says:

    A clumsy and obtuse reference in comparison to T-Paw’s. She needs a better speech writer.

    1. Joe Loveland says:

      You’re right. When engaged in delicate diplomacy, I always feel that one’s metaphors should drip blood.

      1. PM says:

        Is T-Paw actually negotiating? Are his chance for the Republican nomination really helped if he were to come to a (relatively) amicable agreement on the budget? Or will he benefit more from a fight that grabs national headlines where he is seen as standing firm against the democrats and tax increases?

        I just don’t think that he is very motivated to solve this problem.

      2. Joe Loveland says:

        You’re right, he’s not focused on solving the problem. Good presidential politics, and poor state stewardship.

  3. Joe Loveland says:

    The WSJ opposing taxes on the rich is about as surprising as today’s sunrise.

    Average current effective tax rates (the rate you actually pay on all of your taxable income), according to the Minnesota Dept of Revenue:

    People earning $9800 to $31,000 pay 11.8%
    People earning $31,000 to $87,000 pay 12.2%
    People earning $124,000 and over pay 10%
    People earning $176,000 and over pay 9.7%
    People earning $448,000 and over pay 8.9%

    I don’t think everyone is doing their fair share.

    1. Newt says:

      That logic is such a canard.

      By definition, people making less pay a larger percentage of their income for EVERYTHING – from bread, underwear, cigarettes, prostitutes, MTV, crack, opium, malt liquor, shoes, to milk, etc.

      Joe would be hard pressed to argue that the “wealthy” use proportionally more government services than the poor. In fact, the wealthy use far less than the poor.

      At least have the courage to admit that you see taxation’s primary purpose as means to exact egality.

      Here’s a more meaningful depiction of Joe’s tax data …

      People earning $448,000 and over pay >$39,872
      People earning $176,000 and over pay >$17,072
      People earning $124,000 and over pay >$12,000
      People earning $31,000 to $87,000 pay $3,782 to $10,614
      People earning $9800 to $31,000 pay $1,156 to $3,410

      If you factor in all those who get rental tax credits, the bottom tier usually RECEIVE unearned payment transfers from the others.

      1. Joe Loveland says:

        This is our grand philosophical stalemate. You want to focus on gross payment, and I want to focus on ability to pay. I pay more in taxes than most because I make more than most. I think that is only fair, and you think it’s larceny. We’re not going to convince each other.

        For what it’s worth, the reference to drugs, prostitutes, etc.? Not fair.

  4. Mike Kennedy says:

    This is the average tax rate you pay to the state of Minnesota on all your taxable income — correct?

  5. Joe Loveland says:

    I thought they said there wasn’t going to be math involved?

    Here is the Department of Revenue’s grand conclusion:

    “After allowing for the shifting of business taxes, the Minnesota tax system in 2006 was somewhat regressive (and significantly more so than in 2004). In contrast to the results shown in recent studies, effective tax rates were above the 11.2 percent average for all except the tenth decile.

    The Suits index, a measure of the progressivity or regressivity of a tax or tax system, fell from -0.024 in 2004 to – 0.053 in 2006. This change suggests a significant increase in overall regressivity, in large part due to greater income inequality in the stronger economy.

    Minnesota’s refundable income tax credits and property tax refunds for homeowners and renters substantially reduce overall regressivity. In their absence, the 2006 Suits index would fall from -0.053 to -0.075.”

    My imperfect understanding is that a negative Suits Index indicates regressive taxation, and Minnesota’s Suits number is negative. And that latter paragraph looks to incorporate your very fair point about refundable tax credits…and the system still looks regressive after that adjustment, right?

    Bottom line: The numbers I used initially perhaps overstated the point a tad, and for that I apologize. But I think my overall “I don’t think everyone is doing their fair share” point still holds. Minnesota’s tax system is regressive, meaning Minnesota’s tax burden falls more heavily on those with low income.

    Good gawd, my pea brain hurts.

    1. Mike Kennedy says:

      You’re right. However, the department is referring to the total tax system, with all taxes included when it mentions regressive. I think what the Journal was talking about and what I was referencing was the income tax alone.

      I think the state needs to look at its overall tax burden — all taxes — as they affect business owners, property tax owners, renters, high income, moderate income and low income.

      I don’t know how you can make the state income tax any more progressive. So let’s reform the other taxes.

      1. Joe Loveland says:

        But if Minnesota’s overall tax burden is regressive – the burden falls hardest on those with lower income — that’s an argument for doing what the DFL proposed — making the income tax more progressive than it currently is.

        Reason: Making that progressive income tax more progressive/fair makes the overall system less regressive/unfair.

  6. Mike Kennedy says:

    No it doesn’t. The income tax is progressive already. Check out the study. The Suits Index which you quoted is positive on income taxes. Why make it even more progressive and leave the other taxes alone?

    What is not fair about the state income tax? What’s not fair about the federal income tax? Those who make the most, pay the most. Period. We already have that. You want to use the income tax to further punish high income earners to balance out the regressive nature of taxes in general?

    Then address the specific taxes that are regressive.

    Personally, I think in a slow economy with a jobless rate as high as it is, it’s not a good time to discourage businesses from hiring by slapping a bigger income tax on them — and yes, that’s who you are hitting, since most companies these days are sub chapter S corps and LLCs, where income flows directly onto the owner’s personal tax return.

    1. Joe Loveland says:

      If a pot of chili needs more spice, you add more peppers. You don’t say, “well, we can’t add peppers because peppers are spicy.”

      Similarly, if a taxation system needs more progressivity, you add more progressive taxation, such as the new income tax tier for the wealthy.

      But you and I, and Margaret and Tim, disagree on how that pot of chili should taste.

  7. Mike Kennedy says:

    That’s an interesting metaphorical example. I would use another, however. If we have several ingredients and we have sufficient amounts of one — we don’t add more of it. Overuse of one ingredient will ruin the dish.

    You just had to go and mention chili, didn’t you — I have a fatal weakness for it. But thanks. I now know what I’m having for dinner.

  8. Newt says:

    JOE: “This is our grand philosophical stalemate. You want to focus on gross payment, and I want to focus on ability to pay. I pay more in taxes than most because I make more than most. I think that is only fair, and you think it’s larceny. We’re not going to convince each other.”

    You’re right, we won’t convince each other.

    I also think you are confusing fairness with egality. They are hugely different notions.

  9. I’m a little late to the potluck, but here are a couple points on the state and local taxes debate.

    On progressive/regressive taxes: The income tax is (with minor exceptions like some luxury/excise taxes) the ONLY tax that is proportionately higher for people with higher incomes. Raising the income tax is also the only way to keep revenues the same and reduce regressivity.

    Minnesota’s state and local tax system has been getting more regressive because under Pawlenty, new revenue has come from other taxes/fees and more costs have shifted to local governments, which can only levy regressive taxes.

    Because state and local finances are intertwined, it’s not a simple matter to address regressivity just by addressing those taxes as Mike suggests. It would involve a total overhaul of the state and local finance systems.

    On comparing to the bottom: Minnesota’s tax incidence reports are the best and most complete in the nation, and all the mind-numbing math is aimed at calculating who really ends up paying a tax. Business and renter taxes are a couple examples of taxes where one person writes the check, but another ultimately bears the cost.

    However, the least accurate numbers are for the poorest decile because they are hardest to track and more of their income may be from barter and the underground economy. (Transfer payments and credits are taken into account.) Anyone who wants to trade places with households earning under $11k so they can collect earned income tax credits can be my guest.

    And note that tax deductions and credits also flow to businesses and high earners, helping to reduce the effective rate of the taxes they pay.

    On comparing to the top: Mike’s concern about the job impact of taxing individuals whose income flows from business ownership is overstated, but valid. Growth & Justice did a study last session on how many small businesses would be affected by a higher income tax rate.

    The details are too much for here, but basically you need to look at how much more those owners pay (in most cases far less than the cost of one job) and how many of those taxpayers have employees. Then you have to figure job loss (there’s some) vs. economic impact of spending cuts (there’s more).

    On who benefits more from government services: If you look at dollars spent, people with children and the poor might seem to benefit more from government spending, because more dollars are directed to those areas. But as a former business owner, I submit I was able to benefit far more than the poor from safe communities, a well-educated population, etc.

    The courts, highways, a cleaner environment and other public systems tend to benefit the wealthy more than the poor. When my house catches fire or my burglar alarm goes off, I probably get more value out of police and fire services than does the person in the slum apartment or the trailer park.

    1. Joe Loveland says:

      You make a great point about spending cuts affecting the non-poor. “The self-made man” who succeeds with no government help and “the welfare queen” who lives a grand life bilking the government are both caricatures that exist more in our minds than in reality.

      Spending cuts will cause me to spend more of my own money on wheel alignments for my pothole weary tires and health insurance premiums to offset hospitals’ “charity care” cost shifting that escalates when public assistance is cut. It would have been cheaper for me to pay, through taxes, to fix the roads and treat my neighbors’ illnesses before they flared up into crisis mode.

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