In Minnesota, we’ve all heard the phrase “no new taxes” being thrown around for the past eight years. But now, we’ve got a new progressive Governor for the first time in over twenty years who isn’t repeating that mantra. So Minnesota 2020 set out to learn how Minnesota is faring compared with other states in terms of tax fairness.
Their report, “Minnesota’s Tax Fairness Retreat,” shows that our state has become more regressive compared with the rest of the nation. In 2000, Minnesota was in 11th place, but by 2007 we slipped to 15th. Minnesota 2020 also found something surprising:
While that number doesn’t seem so bad consider that only 11 other states had a more aggressive overall change toward regressivity than Minnesota.
Minnesota has a regressive tax system because it relies on property taxes (which hit low- and middle-income Minnesotans harder) rather than on income taxes. After a housing boom from 2004-2006, the gap in effective tax rates borne by middle- and upper-income earners widened so that middle-income earners’ effective tax rate was three percent higher than the top 1 percent in Minnesota.
The new Republican-controlled legislature claims that lowering corporate income taxes–not making Minnesota’s taxes more progressive–is the answer. The Center on Budget and Policy Priorities disagrees, arguing that corporate income tax cuts are unlikely to have an impact on economic growth or generating private-sector jobs. Here are some of the reasons why:
- State corporate taxes are a minor expense for corporations. All state and local taxes represent two to three percent of corporate expenses on average, the Center on Budget and Policy Priorities found, and the corporate income tax is only a fraction of that.
- In the real world, tax cuts have not brought about stronger-than-average economic growth. Check out Ohio. It eliminated its corporate income tax yet its economic performance has been average at best.
- Multistate corporations could use their tax breaks elsewhere. There is no guarantee that money from Minnesota corporate tax cuts will be reinvested in Minnesota.
It’s time that we fix Minnesota’s tax system by making taxes fair and progressive for all Minnesotans, not giving more breaks to large corporations. If we fail to remedy this, our taxes will just become more regressive as time goes on, forcing those with the least to give more than their fair share.
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