Monday, April 30, 2007

How much more progressivity would you like? 

This graph shows the level of state income tax paid per dollar of income earned by income classes in 2006. This is the product of a new study by the Minnesota Taxpayers Association. It reports that we have been passed by other states in terms of lower income taxes. For example while we've fallen from 23 to 26 in the rankings of income taxes paid by households with $50,000 income (1 being highest, 42 being lowest), we have gone from 18th to 13th for families with $100,000 income. For single individuals with $50,000 income, we've gone from 11th highest in 2003 to 8th highest. For families with $500,000 inocme, we have risen from 10th to 9th already. Alas, for the DFL that's not enough -- the House proposal would take that to sixth, and under the Senate we would be #1.

Our state in 2004 has the fifth highest total taxes (state and local) per capita, and fourth highest per $1000 personal income. (The study notes that these numbers change depending on assumptions about the composition of income earned between capital gains, wages, and other income sources.)

The upshot -- we already have a more progressive tax system than most other states, with a great deal of generosity in tax treatment of lower income families. Executive Director Lynn Reed said in this press release:
Minnesota�s income tax system remains mostly competitive since the cuts of 1999 and 2000 for incomes up to $100,000. However, no state can afford to ignore how its taxes rank compared to other states. It is commendable for the Legislature to be considering the regressivity of Minnesota�s entire state and local tax system, but relying solely on increases to higher income households to balance the rest of the system runs the risk of violating not only the competitiveness principle of sound tax policy, but also the principle of visibility, by concentrating tax increases on very few taxpayers to pay for benefits to millions.

Labels: , ,