Tax study filled with distortions

Government officials and members of the media are trying to shape public opinion by distorting facts.

by Joshua Villa

Minnesota media has been filled with outrage during the last two weeks over a study that claims lower-income Minnesotans pay a higher percentage of their income in taxes than higher earners.

The study âÄî issued March 16 by the Minnesota Department of Revenue âÄî stated the top 10 percent of earners have a total state tax burden of 10.3 percent, whereas the bottom 90 percent pay 12.3 percent of their income in state taxes.

The Star TribuneâÄôs March 16 article “Study shows who bears MinnesotaâÄôs biggest tax burden” states, “The new tax report bolstered much of what Gov. Mark Dayton has been saying since the campaign: The rich are not paying the same percentage of taxes as other residents.”

The Minnesota DailyâÄôs March 21 editorial “Tax the rich revisited” concluded “The unjust nature of an all-cuts approach is becoming increasingly evident. The RepublicansâÄô tax plans are fiscally irresponsible and place too high a burden on low-earning Minnesotans.”

These conclusions would be spot-on if the studyâÄôs facts werenâÄôt misleading. However, distortions render the study nothing more than a push piece âÄî written by a government entity that benefits from big government âÄî for DaytonâÄôs budget.

The numbers in the study blatantly distort facts because 26 percent of Minnesotans have no or negative state income tax liability. In other words, the lowest earners are lumped with a higher tax bracket to skew the result and make it look like all lower- and middle-income Minnesotans pay more in taxes than the rich.

So, while some Minnesotans do not pay income tax, they still pay state fees and sales tax. In other words, although they do carry some tax burden, it is incredibly low because these people likely do not pay property tax and income tax âÄî the two most burdensome taxes in the state. Their tax burden cannot be 12.3 percent of their income without having to pay any state income tax or property tax.

Additionally, the inclusion of property taxes in figuring the tax burden of individuals is troublesome.

If an individual makes $50,000 a year and pays property tax of $2,500 per year, he has an effective tax of 5 percent. If someone who earns $100,000 annually owned that same house, he effectively has a 2.5 percent tax burden.

Unfortunately for the people making this argument, property tax is not a tax on income âÄî it is a tax on the value of oneâÄôs property. The house an individual buys is a personal choice, and one of the deciding factors when buying a house is the property taxes that will be owed on the house.

If a lower income person buys an extravagant house or a rich person buys a humble one, the value of the house is what is taxed âÄî income has nothing to do with it. To count property tax as part of the tax burden in this study as a comparison to income really isnâÄôt fair.

Minnesotans will have to decide how to solve the budget deficit, either by budget reductions, tax hikes or a combination of the two. The study seems to necessitate DaytonâÄôs proposal to make the rich “pay their fair share of taxes,” but the false and unfairly calculated statistics compromise that conclusion.

This study shows nothing more than a desire on behalf of the media and those who benefit from large government to shape public opinion in favor of DaytonâÄôs plan by using distorted facts and statistics to make Minnesotans believe that the wealthy arenâÄôt paying their fair share.

When budget cuts are made, the division of the Minnesota Department of Revenue that provided this inaccurate information should be the first to go.


Josh Villa welcomes comments at [email protected]