If you listen to conservative hysterics, you might think that our society has been overrun with socialists who are taking from the despised rich and giving to the unworthy poor. We’ve already seen how, at the federal level, no such radical redistribution is taking place. But what about at the state level? Minnesota has a vaguely lefty reputation; could the commies be at work here?
Yeah, not so much.
(Data from 2011 Tax Incidence Study)
This shows effective tax rates for different groups in Minnesota. People farther to the right have more income, and the higher up the graph you go, the higher the effective tax rate. (I’ve let the graph cut off some of the lines for the lowest 10% as data from that group gets skewed by a variety of factors.)
The three downward-sloping lines represent the effective tax rates of all property, sales, and business taxes in Minnesota. Property taxes stay relatively flat for the middle class and drop sharply for the rich. Sales taxes, as we’ve already seen, are highly regressive.
Business taxes are a little bit more complicated. Since businesses often pass on the cost of higher taxes to their customers through price increases, the effective business tax rate estimates the transferred impact of all state taxes that affect businesses in Minnesota. We can see that, this, too is regressive.
That leaves the personal income tax, the blue line. As we can see, this is the only progressive tax type Minnesota has going for it. When you combine all taxes, Minnesota’s effective tax rate is fairly flat, and the only thing keeping it that way is the personal income tax.
It would be nice if the tax system was fairer. It would be nice if income distribution was fairer, with the rich taking a lower share of total income than they do now and the working class getting paid more. Somehow, however, I don’t see that happening.
If we are to build our way out of the current economic pit, we need more demand. The only way to get more demand is to increase the income of the bottom 90%. If the private sector won’t do that on its own, the public sector needs to play a more active role. We need to invest in our people, and more progressive taxation should be part of how we do that.