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Old 01-07-2015, 10:05 AM
 
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Grist for the mill/food for thought.

http://www.itep.org/pdf/mn.pdf

In assessing just how progressive (or not) Minnesota is, I'd think one of the first things we would look at is the overall tax structure. Though there is a large contingent of individuals out there would like to place horse blinders on any tax-related discussion so that it appears taxation is largely progressive, it is in reality closer to regressive (it's kind of a lop-sided arch where the lowest earners pay taxes lower than the median, middle-income earners pay higher than the median, and upper-income earners pay the least of all).

There is broad agreement between liberals and conservatives that a progressive structure is 'fairest'. This agreement is obviously not universal, and liberals and conservatives disagree about just HOW progressive the structure should be. This article discusses specifically popular notions of 'tax fairness', and then does a mash up of state rankings by 'tax fairness model'. By 'liberal' measures, Minnesota is the 7th fairest state, whereas by 'conservative' measures, Minnesota is 11th. Overall, there is widespread agreement across a broad swath of the political spectrum that all states' overall tax burdens are unfair as they are by and large regressive.

2014′s Most & Least Fair State Tax Systems | WalletHub®


Looking that the first link, I can only chuckle at my uncanny ability to put myself in the 'worst' situation if one considers only tax burden. I'm not sure how the measure is done- by individual or household. If it is done by individual, I'm in the fourth bracket which is in a three-way tie for highest tax burden. If it is done by household, I'm luckily in the 5th bracket and my overall tax burden goes down by a full 1.1%.

One thing that I found puzzling was that Sales & Excise Tax Share of Family Income goes DOWN as your income rises. Since these are flat taxes I didn't understand how that would be possible. I did some digging in the study's methodology and it actually makes sense: as your income rises, a greater proportion of it can be put aside in savings, retirement plans, etc. Lower income people are generally compelled to spend proportionally more of their income simply to get by. Therefore, that 'flat' tax hits a much larger portion of their income, making it a fundamentally regressive tax. This squares with my experience: I sock away 20% of my income to my retirement plan, so I've technically 'sheltered' that income (for now) from this flat tax.

I don't mind paying proportionately more taxes than the poor. I do mind paying proportionately more taxes than those with larger income than my own. I would accept having to pay more in taxes if the tax structure were made more progressive.
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Old 01-07-2015, 12:27 PM
 
Location: MPLS
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Generally speaking, state taxes are regressive, but they're balanced out by progressive federal taxes. Probably not to the degree they ought to be, however.
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Old 01-07-2015, 01:03 PM
 
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Originally Posted by drishmael View Post
Generally speaking, state taxes are regressive, but they're balanced out by progressive federal taxes. Probably not to the degree they ought to be, however.
I agree 100%. Good point.
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Old 01-08-2015, 06:23 AM
 
Location: Mound, MN
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Keep in mind that the chart you reference is dated January 2013. In the spring 2013 MN legislative session there was a substantial tax increase on upper income earners which I'm sure would somewhat change the percentages on the upper end of your chart.

As Drishmael also points out, I think it's also important to combine the effects of Federal Tax policy into these discussions. The federal income tax is highly progressive. In addition, there are many benefit programs at the federal level that actually produce a negative tax rate for those in the lower income brackets (EIC, SNAP, Child Tax Credits, Section 8, Medicaid...).

Personally, I'd leave the tax thing roughly where it is and concentrate on governmental spending restraint.
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Old 01-08-2015, 08:30 AM
 
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If you want a study that goes into a lot more detail and discusses where they got their numbers from:
Tax Incidence Studies

Incidentally, the state of Minnesota seems to think state and local taxes are quite a bit higher than the study previously linked.
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Old 01-08-2015, 09:55 AM
 
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Originally Posted by northsub View Post
If you want a study that goes into a lot more detail and discusses where they got their numbers from:
Tax Incidence Studies

Incidentally, the state of Minnesota seems to think state and local taxes are quite a bit higher than the study previously linked.
I don't follow...when I look at the state source you linked above, on page 15 it breaks down the effective tax rate by decile rather than by quintile in my link. It is true that the decile breakdown shows a very high tax rate for the lowest decile (in 2010, 18.6%; in 2015, 16.4%). However, all the other deciles are pretty much lower in the state document than in the one I linked (for example, the 2nd quintile is listed as 9.6% tax rate rather than in the state's document the corresponding deciles - third and fourth- are at 7.4 and 7.1 respectively). I'm not sure if I'm reading these charts correctly, however, perhaps I'm misinterpreting something(?).

Overall state tax burden is quite low historically speaking, per Figure 1-7 on page 18. Of all the years listed on the chart beginning in 1990, the 2015 estimate is the second lowest at 11.3%. There does not appear to be any sign of an upward trend. As your link states on page 14 "Between 2010 and 2015, effective tax rates are projected to fall in every decile (though the tenth decile rounds to the same number in both years)."
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Old 01-08-2015, 10:18 AM
 
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Originally Posted by BillWallace View Post

As Drishmael also points out, I think it's also important to combine the effects of Federal Tax policy into these discussions. The federal income tax is highly progressive. In addition, there are many benefit programs at the federal level that actually produce a negative tax rate for those in the lower income brackets (EIC, SNAP, Child Tax Credits, Section 8, Medicaid...).
“The progressivity of the U.S. federal tax system at the top of the income distribution has declined dramatically since the 1960s.”

Economist's View: The "Dramatic" Reduction in the Progressivity of Federal Taxes


Whereas the federal income tax is progressive, there are other federal taxes- social security, FICA- which are regressive. Relying on the federal tax code to correct the state tax burden runs contrary to what we can see empirically has been happening for the past 50 years in this country. Yes, overall federal taxation is progressive - both Drishmael agreed on that. We also agreed that it likely isn't progressive 'enough', which is of course subjective.
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Old 01-08-2015, 11:24 AM
 
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Originally Posted by Thedosius View Post
I don't follow...when I look at the state source you linked above, on page 15 it breaks down the effective tax rate by decile rather than by quintile in my link. It is true that the decile breakdown shows a very high tax rate for the lowest decile (in 2010, 18.6%; in 2015, 16.4%). However, all the other deciles are pretty much lower in the state document than in the one I linked (for example, the 2nd quintile is listed as 9.6% tax rate rather than in the state's document the corresponding deciles - third and fourth- are at 7.4 and 7.1 respectively). I'm not sure if I'm reading these charts correctly, however, perhaps I'm misinterpreting something(?).
Your source claims to be for state and local taxes. You are only looking at the state numbers on page 15. The third column (Total) should give the comparison.
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Old 01-08-2015, 01:29 PM
 
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Originally Posted by northsub View Post
Your source claims to be for state and local taxes. You are only looking at the state numbers on page 15. The third column (Total) should give the comparison.
Aha! You are correct!

Per the note in the first link "Top figure represents total state and local taxes as a share of personal income, post- federal offset", I'm guessing that accounts for the difference.

In any case, my fundamental point was about progressivity/regressivity. Both show an overall regressive tax structure when looking at effective state and local taxes, they just crunch the numbers differently. The population-decile Suits index on page 18 expands on this considerably, as does table 1-8 on page 20.
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Old 01-08-2015, 02:55 PM
 
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Quote:
Originally Posted by Thedosius View Post
Aha! You are correct!

Per the note in the first link "Top figure represents total state and local taxes as a share of personal income, post- federal offset", I'm guessing that accounts for the difference.
The federal offset isn't the difference. Table 4-6 on page 69 of the state of Minnesota document does the federal offset as well.
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