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Income tax increase tied to business cut

Date Published: 05/01/2009


Income tax increase tied to business cut

Pioneer Press | February 24, 2005
By Patrick Sweeney

A liberal public policy think tank called Wednesday for an increase in Minnesota personal income taxes and an offsetting decrease in many business taxes.

Joel Kramer, a former newspaper publisher and former Democratic candidate for lieutenant governor who leads the think tank, said the changes would reduce a tax advantage that he said the wealthiest people in the state now enjoy.

Kramer acknowledged that the still-incomplete tax proposals from the St. Paul-based think tank called Growth & Justice won't be enacted anytime soon.

"It's not going to get passed, not this year," he said.  "It's for thinking about."

State Revenue Commissioner Dan Salomone called the tax analysis and proposals for change advocated by Growth & Justice a "good, hones piece of work."

"It's pretty mainstream stuff," Salomone said.  

Kramer said two of the three scenarios for tax changes he unveiled Wednesday would re-jigger who pays taxes, how much they pay and what kind of taxes they pay.  But the changes would not raise or lower overall tax collections.  The third proposal would increase tax recipients by about $1 billion a year by raising the cigarette tax by $1 a pack.

For years, Minnesota has had one of the least-regressive state and local tax systems in the country.  Most people, at all income levels, pay about 11 percent of their income in taxes.  But at the very highest income levels, for the 1 percent of taxpayers who earn more than $400,000 a year, that dips to about 8.2 percent.

Kramer, who retired in 1998 as publisher of the Star Tribune newspaper in Minneapolis, called for ending that tax break by adding a new - fourth - tax rate that would apply only to high incomes.  He also proposed eliminating a tax break for interest earned on tax-free municipal bonds.

Largely because of the elimination of that break for municipal bonds, the Growth & Justice proposals would increase income taxes for a few people at all income levels, although most of the increases would be concentrated at incomes above $400,000 a year.

The changes advocated by Growth & Justice would offset the income tax increases by eliminating the corporate income tax and a number of other business taxes.  The group also called for significantly expanding Minnesota's sales tax base - to include services, and perhaps clothing - while reducing the sales tax rate.

The business taxes are routinely passed on to consumers by companies and are among the most regressive taxes many low-income people pay, Kramer said.

Kramer unsuccessfully sought the DFL endorsement to run for lieutenant governor in 2002.

The tax proposals are available online at: www.growthandjustice.org.  Patrick Sweeney covers state government and its effect on Minnesotans.  He can be reached at psweeney@pioneer-press.com.


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