Choosing Mediocrity and Greed

Choosing Mediocrity and Greed
Minnesota as a Microcosm of the Nation



Before Governor Dayton capitulated to demands the state continue to operate on a budget that excoriates the backs of lower income Minnesotans’ I wrote a commentary on the reasonableness of his proposals. They were based broadly on two assumptions most Americans have subscribed to forever.

First, there are functions government can provide better and more efficiently than the private sector and should provide through general taxation. Secondly, those who benefit the most from living in America should contribute more than those who benefit the least.

It turns out, because of the growth by topsy of our system of taxation; both the state and federal tax systems are regressive with the exception of the income tax. Income tax is the only tax opponents of increasing taxes point at. They never say income in front of tax.

Minnesotans in the top 1% of incomes pays less as a per cent of their income in state and local taxes than the bottom 99% of us.

Opponents of increasing taxes on the very highest income brackets point out taxpayers in the top 10% pay 56% of income tax. This is true according to the Minnesota Revenue Department’s Tax increment study (MDTI) of 2011. In the same paragraph they note the same taxpayers bore 38.5% of the total tax burden having 42% of a total income. The bottom 10% paid no income tax but they paid 2.4% of the total tax burden but received less than 0.9% of the total income.

Tax rates by deciles from the MDTI shows the rate of all taxes on Minnesotans (state and local) is the lowest for the highest incomes at 9.7%.

How the Democrats and Dayton could not get this into the media is beyond me. The scoring of his proposals after watering down his original proposals showed that 90% of his increase would be paid by the top 5% and fully 80% by the top 1% of incomes.

This would hardly be confiscatory on those poor million/billionaires. The MDTI shows this would be an increase of 1.77% on their total tax rate. Since state and property tax is deductible on federal taxes this would lower the effect on their state tax rate to a 1.22% increase. The federal government would pay for about 30% of the increase coming to Minnesota.

Instead of solving the budget problems the legislature pulled a Pawlenty. A name that should become an adjective describing kicking the fiscal can down the road by delaying payments, borrowing from future revenue, and defunding social safety nets for the politically and financially impoverished.
This is what the legislature did. Politicians will surely write in and try to confuse you about this. I invite you to explore the Minnesota Revenue web site yourself.

Minnesota is a microcosm of the nation and its fiscal madness. Both are saying, in effect, we cannot afford to join all other advanced nations in providing the same safety nets and services other nations do. They have convinced enough people that undeserving, slothful, and devious people are “milking the government cow from 300 million teats”. They still believe the fabrication of the welfare queen driving up in her Cadillac to get her welfare check that was disproved thirty years ago.

I have not found an IRS document like the Tax Incidence Studies. I did find a publication on the top 400 incomes reported for 2008. The top 400 reported had an average income of 270 million dollars. Approximately one third had an average federal income tax rate of less than 15%. Only 15% of such returns had an average between 30 and 35%. Less than 4 out of 5 returns for the fabulous 400 reported wage or salary income. They had income only from rent, dividends, interest, capital gains, and the like. All these are subject to preferential tax treatments. It also indicates these 88 of these folks do not contribute anything to social security.

The average tax on $270 was 49 million for an average tax rate of 18.11%. When you hear politicians say you can’t overtax “job creators” and throw 35% figure at you it might be interesting to ask them if they know the average rate billionaires pay in income tax. Their response will be the rich invest their money and create jobs. The rich invest their money in relatively mature and large business and industry. That is impossible to do and keep your investment in the U.S. Both General Motors and Ford are making most of the cars in other countries. Chrysler is owned by an Italian company. IBM, General Electric, you name a titan of Wall Street and they are global. Much of the uber rich create jobs in other countries.

F. Scott Fitzgerald said, “The rich are different from you and me.” I would rather dwell on a quote from Warren Buffet one of the richest men in the country. “There is something wrong with a system where I pay less of my income in taxes than my secretary”.

In a kinder and gentler time conservatives like Theodore Roosevelt knew it was not good to charge those riding in first class on the ship of state the same as those in steerage. Ronald Reagan recognized the need for a progressive tax and after his 1982 tax cut raised taxes 11 times. Reagan’s tax increases in 1983 were called the largest peace time tax increases in American history.

In a kinder and gentler time the public made a decision to protect our disadvantaged, handicapped, and disabled. We decided to honor our elderly, protect them from poverty, and provide dignity for them in their dotage. We are not broke. We can afford it. We choose not to. We choose to go back to 30% poverty for those over 65. We choose to go back to the poor farms. We choose Hoovervilles. We choose Grandma and Grandpa living with their children for the last decades of their lives.

I don’t remember the Hoovervilles but I do all the rest and I don’t choose it.