The 4th Bracketeers: who would pay Minnesota’s higher tax rate?

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MPR Photo/Jeffrey Thompson

On Monday, I took a look at the geography of Minnesota’s “fourth bracketeers,” the 2 percent of Minnesota’s top earners who would be pushed to a higher, fourth tax bracket under Gov. Mark Dayton’s tax and budget proposals. Those affected would would have paid an average $7,240 more in taxes in fiscal 2013.

Beyond geography, what else do we know about the folks — people with taxable income above $250,000 for those married and filing jointly, $200,000 for head of household and $150,000 for a single taxpayer — who would end up in the fourth bracket?

For obvious reasons, the Revenue Department won’t give out data that might identify specific filers. But along with the geography, the department did provide information offering a glimpse, at least, of who will bear some of the burden of the fourth bracket should it become law.

Married couples. Of the 53,600 Minnesota resident filers who would pay more tax under the proposal, 40,000, about 80 percent, would be married filers.

Singles would pay $61 million of the $388 million in tax paid by resident filers. (Another $44 million would come from 14,600 part-time residents.)

Business owners One of the arguments against the fourth bracket is that many of the folks who’d be snagged are small businesspeople who’ll be hit by a big new tax bill that will compel them to pull back on their businesses and cut back jobs or expansion plans.

Turns out that many people with business income would feel something, although it’s not clear how much they’d be nicked.

While Dayton has argued that only the top 2 percent of Minnesotans would pay more under his plan, the Revenue Department estimates that, “6 percent of all of the Minnesota residents who report at least one dollar of positive income from a partnership, S-corp, or sole proprietor would have income high enough to pay tax on any of their income at the fourth tier rate.”

Those numbers, though, come with a major caveat: Only 12,700 reported that at least 20 percent of their income was business income of these types.

That works out to around one half of one percent of the 2,439,867 full time Minnesota tax returns filed in 2010.

If anyone has any other numbers to examine on this, send them to me and we’ll keep the conversation going. Otherwise, it doesn’t look like the fourth bracket would have a broad impact on the state’s small business owners.

Where does the Fourth Bracket live? Mouse over the dots on the map to see county-by-county counts.