In the past few years, we have seen Minnesota slip on a variety of leading indicators of social and economic well being. Minnesota’s economic performance slowed significantly in the mid-2000s, as measured by growth rates for income, GDP and job growth. The income gap that separates the top earners from rest of us has widened. Meanwhile, the wealthiest Minnesotans pay the lowest proportion of their income in state and local taxes.
Even though we know a majority of Minnesotans support making wise investments in people and places to build the state’s productive capacity, the political climate constrains the ability of lawmakers to spend more where it can make a difference. The anti-tax philosophy has contributed to the economic predicament we find ourselves in. And all of this, plus demographic changes over which we have little control, argues for a fresh look at how we raise revenues and invest in our state to encourage economic growth. So why haven’t we made progress on a topic that would be in our best interests? Because first, we have to get past some cherished but erroneous beliefs about taxes.
Businesses don’t usually pay taxes – these get shifted to people by way of higher prices for consumers, lower wages and benefits to employees, and, as a final resort, reduced returns to investors. The highest-income households end up paying the smallest proportional share of income in business taxes, with the lowest earners bearing a greater burden. Read More
Growth & Justice presents four considerations for rethinking taxes. Three of these four points — fairness, sufficiency of revenue, and simplicity — are standard tax policy guidelines. The fourth — prosperity building — asks “can we make changes that will grow the economy in a way that benefits all Minnesotans?”
We can probably make improvements in the other three without having any direct, measurable impact on prosperity, so it’s a question worth asking as we look at potential policy changes: Will this change lead to increased wealth-creating capacity in our society? Or will it only help widen an income and opportunity gap that is already growing of its own accord? Read More
Why not swap a lower business tax for raising the income tax at the top? Growth & Justice has suggested that about a penny increase per dollar of income on average would restore the price of government to a level comparable to the years of Republican governor Arne Carlson's administration (1991-99). One way to do this is by significantly lowering some business taxes in exchange for new top marginal income tax rate. Read More