Minnesota Republicans are proposing an across the board half percentage point income tax cut – a proposal that would send a large amount of dollars back to top income earners and much smaller amount to other Minnesotans.
Calling it the “Family Surplus” tax cut, Sen. David Thompson (R-Lakeville) emphasized the proposal is not “give back” program. He wants to make lasting changes in the tax code. “It’s time to figure out a comprehensive plan and a way to give structural help to people to change – not just a give back program, we don’t want that. We want to change the system so that people have more money in pockets.”
Sen. David Hann looked at the cut as a way of preventing additional government spending. “Rather than take the surplus and just spend more money we want to return it to the people who paid the taxes.”
The change would not take effect until 2016.
Who benefits and how much?
Republicans said the the average single tax filer would save $167 on the cut. A married couple would save $524. However, that’s an average. The tax cut is structured as a percentage of income – it is a half percentage point cut. Using that math, someone making $500,000 a year would see about ten times more dollars in tax cuts than someone who is making $50,000.
That’s why Hann emphasized the plan was to return the money to the people who had paid the taxes. That’s only the income tax and doesn’t take into account much more regressive state taxes such as property taxes and sales taxes which are not based on people’s income or ability to pay.
To get a clearer picture of tax burden as a percentage of income you need to look at the Minnesota Tax Incidence Study which shows those who are poor and middle class pay a higher percentage of their income in state taxes (29.9% to 11% of income) than those in the highest income bracket (9.6% of income). That disparity has dropped a bit in the past few years, mostly because of the recent increases in the state’s income taxes on the highest earners.
The bill will be introduced on Monday, but no hearing has been scheduled yet.
Republicans made the announcement just a few hours before Governor Mark Dayton’s State of the State address saying they were concerned about the state of the family.
A video replay of Dayton’s State of the State can be seen here on The UpTake.