Instead of cutting from struggling Minnesotans, tax the rich. Yes, really. They're not paying their share.
Minnesota's budget, once again, is in the red. And Gov. Tim Pawlenty, once again, is calling for "sacrifice" and "compromise."
The governor's proposed sacrifice would come, once again, mostly from low- and middle-income Minnesotans, especially students, educators and hard-pressed families in need of health care. The compromise would be demanded, once again, from a Legislature that has been forced by threats of vetoes to cut, shift and borrow. Remaining unchanged, once again, would be the governor's willingness to sacrifice the interests of everyone but the wealthiest Minnesotans on the altar of his national political ambitions.
Here's a novel alternative. For the first time in decades, let's ask the richest people in Minnesota to pay their fair share of taxes.
According to a 2007 study by the governor's own Department of Revenue, Minnesotans in the middle, earning about $40,000 per year, pay 12.2 percent of their incomes in state and local taxes. However, the 1 percent of taxpayers who make $350,000 or more annually pay only about 9.6 percent of their incomes in those combined state and local taxes. Thus, middle-income Minnesotans pay an effective state and local tax rate that is about 27 percent higher than that paid by our wealthiest residents. And that tax favoritism is projected to become even worse, not better, under current state laws.
This gap has been a crucial factor in Minnesota's budget problems of the last decade and in our wrong-headed disinvestment in education, transportation, health care and environmental protection. According to the Minnesota-based economic think tank Growth & Justice, the state has forgone revenues of at least $7 billion since the whopping income tax cuts of 1999 and 2000, and Minnesotans with the top 15 percent of incomes, those making more than $100,000, received 60 percent of those tax benefits.
Meanwhile, national studies continue to show that the richest Americans now have a greater share of income and wealth than at any time since just before the Great Depression.
This tax favoritism is un-Minnesotan. It is certainly not the progressive tax system that helped create the "Minnesota Miracle" of the early 1970s, once admired nationwide. It's not even the "flat tax" or "fair tax" that many conservatives now advocate nationally. It is a regressive tax system, which indefensibly favors those who can most easily afford to pay at the expense of those who can least afford to pay. It is an unfair tax code that unnecessarily coddles the rich at the expense of schoolchildren, schoolteachers and poor sick people.
Pawlenty is not the first Minnesota politician to succeed with the antigovernment mantra of "no new taxes." And he's right that many Minnesotans are already taxed at or beyond their abilities to pay. However, for years this governor and his predecessor have ignored their own Department of Revenue's tax incidence reports, which showed this growing gap between what the wealthiest Minnesotans don't pay in taxes and what most others do pay.
This tax favoritism for the rich is costing our schools, universities, hospitals and other essential services upwards of $1 billion per year. It may be great for political support and campaign contributions. But it's terrible for Minnesota. It's unfair, and it's wrong.
Defenders of the state's tax favoritism will try to destroy this proposal by screaming "tax increase." It would be a tax increase; but only on the richest Minnesotans, perhaps the top 5 percent, who are making over $150,000 per year and are now paying less than their fair share of state and local taxes.
I am one of the people who can afford to pay my fair share of taxes. The rest of Minnesota cannot afford to let us keep paying less.
Mark Dayton is a former U.S. senator from Minnesota.