Lori Sturdevant: House GOP misses its tax relief target

Minnesota House Republicans said last week that they would aim $300 million in unspecified tax relief at low- and middle-income taxpayers.

The specifics are now spelled out -- and it appears that the Republicans need to improve their aim.

The GOP proposal calls for a reduction in the rates attached to the lower two of the state's three-bracket income tax system.

That might sound like a tax cut for lower-income workers – and it is. But it also applies to upper-income workers, and they stand to receive the lion's share of the benefit.

Here's how the state taxes income in 2011 (for this example, I'm assuming a married-filing-jointly return): The first $33,770 of every filer's taxable (not gross) income is taxed at 5.35 percent.

The portion of taxable income between $33,771 and $134,170 is taxed at 7.05 percent; and the portion that's above $134,171 is taxed at 7.85 percent.

Reduce the rates in the first two brackets, and the maximum benefit of that change goes to filers with taxable incomes that reach into the third bracket – in fact, those with taxable incomes between $250,000 and $500,000, according to a Department of Revenue analysis of the House tax bill.

For example, the average tax cut for couples with taxable income between $30,000 and $49,999 would be $26 under the House plan, while for those between $250,000 and $499,999, it would be $206.

That approach also adds $221 million to the projected $5 billion state deficit in 2012-13. There's a better way to send tax relief to lower-income Minnesotans: put more money into the property tax refund program, which flows to homeowners with taxes disproportionately high relative to their incomes; and into the renters' credit, which is property tax relief for low-income renters.

I see that the House's bill would cut the renters' credit program by $60 million per year. There's that faulty aim again.

Lori Sturdevant is a Star Tribune editorial writer and columnist.