Study shows middle-income earners pay most

Published 6:09 pm Saturday, March 14, 2009

Last week, state economists revealed that Minnesota’s budget deficit has grown from $4.8 billion to almost $6.4 billion. If we utilize the full $1.8 billion in federal Medicaid dollars available to us, the shortfall we will have to reconcile this session is $4.6 billion. At first glance this appears to be an improvement, but the challenges before us remain immense.

State Economist Tom Stinson called this “the longest and deepest recession since World War II,” and said the state’s economy will likely not resume growing until the end of 2011 or into 2012. I believe Minnesotans are beginning to understand that the solution to this crisis will not come quickly or easily.

This week, the Minnesota Department of Revenue released its tax incidence study. This report, compiled every two years, details taxes paid by businesses and individuals, both in the past and projected for the future.

Email newsletter signup

According to the Department of Revenue, the major objective is to provide taxpayers and policymakers with important information on the equity or fairness of the overall distribution of Minnesota taxes.

In other words, who pays Minnesota’s taxes?

The study shows that our state tax system became even more regressive from 2004 to 2006, meaning that higher — income earners paid lower effective tax rates than lower — income earners. This continues the trend that we saw with the last report two years ago.

We also learned this pattern will continue into the future, according to the new report. In 2011, households with incomes below about $136,000 are projected to pay 12 percent or more of their income in state and local taxes. By contrast, the top 5 percent of households are projected to pay 8.5 percent of their income in state and local taxes, and those making over $27.1 million will pay 7.7 percent of their income in state and local taxes. As it exists today, the tax system in our state asks lower and middle-income earners to pay a larger percentage of their take home pay in taxes than higher earners.

In addition, according to Stinson, Minnesota wages are declining. Having regressive taxes increase at the same time that wages decrease is a race average Minnesotans just can’t win.

We also recently learned that property taxes — one of the most regressive — are projected to bring in more revenue than the income tax for the first time since 1996. Two years ago, the Gov. Tim Pawlenty vetoed a tax bill that would have reduced property taxes on homeowners, not just slowed their growth. Had that bill been signed into law, it is likely property taxes would not have taken over the No. 1 spot.

It is not an easy task to work on tax fairness when we are facing such a significant budget deficit. However, at a time when people are losing their jobs, their health insurance and their homes, we have to be careful not to increase their burden. As we make these decisions, every option will be on the table.

As always, I am honored to serve. Please continue to be a part of the process by contacting me with your concerns and suggestions about our state budget. I can be reached at (651) 296-8216, or by e-mail at

Robin Brown, DFL-Moscow Township, is the state representative for District 27A.