Editorial Roundup: DFL must aim for middle on tax cuts, increases
Published 8:50 pm Tuesday, April 25, 2023
Sound tax and spending policies for any government should revolve around principles of equity, economic efficiency, economic growth and having those who benefit from a service pay at least part of the costs.
DFL plans for tax cuts and tax increases hit the mark in some cases and miss in others on these measures. The House DFL majority released its major tax and spending plan this week that calls for higher income taxes on the wealthy and corporations, and tax cuts and credits for families with children and lower income taxpayers as well as renters.
It’s hard to argue with the equity effort. It enhances Minnesota’s already progressive tax system, increasing the tax rate on couples with $1 million or more in income to 10.85% on earnings over $1 million, up from 9.85%. That would hit about 24,000 filers (0.8%) with an additional $9,000 in taxes.
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On the other end of the income spectrum, the House DFL proposals calls for $1,200 per child tax credits — reducing a tax bill dollar for dollar — for families with $35,000 of adjusted gross income and phase out completely for those with $70,000 of income.
That would cost the state about $360 million a year and would be aimed at the lowest income Minnesotans. The tax on the wealthy and corporations would bring in an about $500 million a year. Those new corporate taxes also rely on taxing foreign income of domestic corporations, a calculation that is fraught with complexity and may be problematic.
The child tax credit was designed to replicate the federal COVID child credit, which has expired but was credited with bringing down childhood poverty by some 50%. The Minnesota credit is estimated to bring down childhood poverty by 25%.
We put a high value on eliminating childhood poverty. Research shows that society bears much lower costs for everything from food stamp programs to incarceration rates if it keeps children healthy and safe when they are young. Healthy children grow into productive, tax-paying adults.
The elimination of state taxes on Social Security benefits is likely to be a point of negotiation. We have favored completely eliminating the tax. It will make Minnesota more competitive with the 39 other states that have eliminated the tax.
Above all, the Legislature should not spend one-time surplus money for ongoing expenses. The bulk of the surplus was born of higher corporate and income taxes and lower spending in schools and expensive health care programs due to federal COVID aid.
We’re not likely to see those economic circumstances again anytime soon. A centrist, moderate approach to tax cuts and tax increases would be best.
— Mankato Free Press, April 23