In their final debate before the primary Sunday night, two leading DFL candidates for governor wrangled over taxes.
House Speaker Margaret Anderson Kelliher said that former Sen. Mark Dayton’s plan to raise taxes on the richest Minnesotans would give the state the highest tax rate in the country.
“We’d be higher than Hawaii,” she said in the Aug. 8, 2010, debate.
“Not so, Dayton countered.
If you added $2 billion a year… you would go from 9th highest to 7th highest state in the nation,” Dayton said. “We would not be the highest taxed state.”
Kelliher’s claim is inconclusive; Dayton’s is on the money.
Before investigating these two claims, it’s important to point out that Kelliher and Dayton are actually talking about two different things: tax rate and per capita tax burden. But both reveal important aspects of a state’s tax system.
“We’d be higher than Hawaii.”
Dayton has pledged to boost revenue $4 billion per biennium by making the wealthiest households in the state – those in the top 10 percent – pay their “fair share” of taxes; Dayton defines this as 12.5 percent, or the average state and local tax rate for the bottom 90 percent of earners.
Kelliher’s campaign did not return PoliGraph’s inquiries about her claim. But it appears she was referring to Hawaii’s income tax rate, which, at 11 percent, is the highest in the country. (Minnesota’s highest rate is 7.85 percent.)
Here’s the rub: Dayton has not detailed his plans for changing the income tax rates on the top 10 percent. He’s simply said the he wants the overall state and local tax burden to be 12.5 percent.
That said, income tax makes up a sizable portion of state and local taxes. To make the $4 billion Dayton’s promised would likely require a significant income tax hike. So, it’s not out of the question that Dayton’s tax plan could put Minnesota’s rate in front of Hawaii’s.
“We would not be the highest taxed state.”
Dayton points to an annual study compiled by the Washington, D.C.-based Tax Foundation to back his claim. According to the report, individuals pay about $4,688 annually in state and local taxes, making Minnesota the ninth highest in per capita state and local taxes.
Under Dayton’s plan, the state would bring in about $2 billion more annually, and that means individuals would pay about $5,057 per year and Minnesota would be bumped to 7th place.
The Minnesota Department of Revenue tracks somewhat different rankings, but in any case, Minnesota would not be the highest taxed state in the country under Dayton’s plan.
Kelliher’s claim is an apples-to-oranges comparison. But it’s not out of the realm of possibility that Dayton’s tax plan could give Minnesota the highest tax rate in the nation. Until Dayton releases more details, Kelliher’s claim is inconclusive.
On the other hand, Dayton said that Minnesota would not be the highest taxed state under his proposal. When it comes to dollar figures, he’s correct.
Minnesota Public Radio News, Question by question: The final DFL debate, Aug. 8, 2010
The Tax Foundation, State Individual Tax Rates, 2000-2001, March 25, 2010
The Tax Foundation, Minnesota: State and Local Tax Burden, 1977 – 2008, accessed Aug. 9, 2010
Mark Dayton campaign website DaytonDeficitSolution.pdf
The Federation of Tax Administrators, State Individual Income Taxes, accessed Aug. 9, 2010
Minnesota Public Radio News, Tom Scheck interview with Minnesota Department of Revenue Tax Research Director Paul Wilson, accessed Aug. 9, 2010
Interview, Katharine Tinucci, spokeswoman, Mark Dayton, Aug. 9, 2010
Interview, Mark Haveman, executive director, Minnesota Taxpayers Association, Aug. 9, 2010
Interview, Bill Ahern, Director of Policy and Communications, The Tax Foundation, Aug. 9, 2010