Response to "Who Pays?" report from Institute on Taxation and Economic Policy
January 14, 2015
- A national study out today confirms Minnesota is doing a better job at sharing the responsibility for paying for public services among all taxpayers than most other states in the U.S.
The efforts that Minnesota lawmakers have taken to make the tax system more fair have worked. Minnesota has shrunk the gap between what most Minnesotans pay in state and local taxes (measured as a share of their incomes) and the smaller percentage that those with the highest incomes pay.
This has happened thanks to policy changes made in 2013 and 2014 including:
- Adding a new income tax rate for the 2 percent of Minnesotans with the highest incomes;
- Increasing property tax refunds for homeowners and renters so that low- and middle-income Minnesotans don’t pay too high a share of their incomes in property taxes; and
- Increasing the Working Family Credit, which offsets a portion of the significant state and local taxes that lower-income working families pay.
Minnesota relies more on the income tax, which is based on the taxpayer’s income, and this is a critical approach for states that want to make sure their low- and middle-income residents don’t pay more than their fair share to support vital public services. Other states rely more heavily on property and sales taxes, and low- and middle-income people pay a higher share of their incomes on these taxes than people with high incomes.
As the report shows, states often hailed as being “low tax” actually tax their low- and moderate-income people substantially through sales, property and other taxes. These states are low-tax states only for the well-off.
Minnesota lawmakers must not hit “rewind” this legislative session, and should avoid tax cuts that would primarily benefit the wealthiest. Unfortunately, several proposals to cut the estate tax and income tax have already been proposed.
Bottom line: A fair tax system is critical to making sure all Minnesotans share in funding our schools, transportation systems, vibrant communities, and other building blocks of our state’s growing prosperity.