Minnesota: Not As Rich As They Thought
posted at 8:48 am on September 20, 2010 by Mitch Berg
Mark Dayton, former Senator and scion of the Dayton’s department store fortune, is running for governor in Minnesota. For months, he attacked his GOP-endorsed opponent, the Chris-Christie-like Tom Emmer, for “not having a plan”.
This past week, Emmer released the final details of his high-level plan to balance the state’s budget (currently slated to have a $6 Billion deficit). It is, obviously, sparking much debate in Minnesota.
But Mark Dayton’s “plan” – which is mostly built on the idea of “taxing the rich”; even the TV ads say so – oddly is getting less scrutiny. Dayton Says: “Taxing the Rich” will raise four billion dollars.
This proposal adds a new top bracket at a rate of 10.95% starting in tax year 2011. The 10.95% bracket is set at $150,000 for married joint filers, $75,000 for married separate filers, and $130,000 for single and head of household filers. The new bracket is not adjusted yearly for inflation although the bottom brackets are adjusted for inflation in keeping with current law. The tax year impact is as follows:
And the end result, according to the MNDoR?
Tax Year Impact (in millions):
TY 2011 $752,800
TY 2012 $813,600
TY 2013 $879,100
So while Mark Dayton promised that “taxing the rich” would raise $4 Billion, almost closing the gap (but not quite; Dayton’s budget proposal (PDF document here) ends with the curious line “That leaves me $635.4 million to go”), in fact Dayton’s tax hikes will raise no more than $1.7 billion.
In other words, cranking the tax on “the rich” to a confiscatory 8 to 11% (actually 10.95, but let’s be honest here…) brings in less than half of what the Dayton budget “plan” says it will.
But even that is over triple the tax hike that the completely DFL-dominated Legislature could pass at the height of Obamamania; the Minnesota Senate passed a $400 million hike by one vote, long before anyone in Saint Paul associated “Tea Parties” with anything but Earl Gray.
Mark Dayton’s budget is DOA, even if he is elected, and even if the GOP doesn’t flip one of the two chambers back to GOP control.
The media isn’t reporting it that way yet, of course.
Cross-posted at Shot In The Dark.
Update (Ed): Keep in mind, too, that MnDOR uses a static analysis to get those numbers — in other words, they presume absolutely no behavior will change with the creation of this new tax bracket. But of course things will change; the new tax will take more capital out of the market, which will lead to less wealth creation and less income, so other tax revenues will start to shrink, or at least not grow as projected. Also, those with means will move their wealth and income streams to more tax-friendly states like South Dakota … just as Mark Dayton himself has done.
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