Before former Gov. Tim Pawlenty arrived in Boston, Mass., a few weeks ago to speak at a tea party rally, Minneapolis Mayor R.T. Rybak gave his take on the former governor’s record.
“The facts are this: Under Tim Pawlenty, the average tax rates went up for the bottom 90 percent… of Minnesotans. The richest 10 percent had their average taxes go down,” Rybak said during an April 14, 2010, conference call with Boston reporters. “So if the Tea Party wants to represent the top 10 percent of the country and raise 90 percent of the people’s taxes, they’ll love Tim Pawlenty.”
There’s truth to Rybak’s claim, but he leaves out an important detail.
Rybak is talking about the effective tax rate, which is the ratio of taxes to income.
Generally speaking, he’s correct. Between 2002, the year before Pawlenty took office, and 2008, the wealthiest Minnesotans – the top 10 percent – saw their effective state and local sales tax rate decline slightly. Meanwhile, lower earners generally saw their rates increase slightly.
And Pawlenty’s policies played a role in that shift. For example, he supported cuts to Local Government Aid, which prompted some local governments to raise property taxes for many Minnesotans. That increase largely hit middle-and-lower income earners, according to the Minnesota Department of Revenue. A new cigarette fee backed by Pawlenty also changed effective tax rates.
But something else happened during Pawlenty’s time in office: The richest Minnesotans got richer, in part due to unusually high capital gains income. So, while taxes may have increased for everyone in the state, in terms of percent of income, those changes were less dramatic for the state’s wealthiest.
Rybak is correct that effective tax rates went up a bit for lower earners, and down slightly for higher earners. These changes have to do with how much money Minnesota’s wealthiest made during Pawlenty’s tenure, but they were also affected by changes in tax policy.
Though Rybak didn’t provide all the details in his conference call, his claim is close enough to be accurate.
Minnesota Department of Revenue, 2011 Tax Incidence Study, March 2011
Interview, John Stiles, spokesman, R.T. Rybak, April 28, 2011
Interview, Aaron Twait, Research Director, Minnesota Taxpayers Association, April 28, 2011
Interview, Paul Wilson, Director of Tax Research, Minnesota Department of Revenue, April 29, 2011
The Humphrey School