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Minnesota's "tax incidence analysis:" are taxes fairer now?

Well, it depends. In some regard, the analysis done by the state's Department of Revenue shows that taxes are indeed fairer now across socioeconomic lines. On the other hand, there are still taxes that disproportionately affect one economic class more than others.

The analysis performed at the behest of Governor Mark Dayton and the DFL-controlled state legislature was aimed at getting a broad view of how the state's current tax scheme impacted all tax strata. The results are promising in some ways, showing that newly passed tax measures will help to undo some of the unfairness that has crept in since the 2000 and 2004 legislative sessions.

Even so, Minnesotans in every tax bracket will endure a higher tax burden, both directly (in the form of increased income/payroll taxes, sales taxes and property taxes), and indirectly (by paying more for goods and services from vendors who are suffering from their own added taxes). Direct tax increases will be anywhere from .13 percent (possibly less) for those with income up to about $202,000 and 1.4 percent for those making more than $510,000 a year.

Like most other things happening at the state capitol, though, the latest "Tax Incidence Analysis" (the technical name for the tax study performed by the Minnesota Department of Revenue) has stoked partisan rancor. There are some Republicans rallying against the huge income jump felt by the wealthiest Minnesotans, while DFL senators and representatives are taking aim at taxes that will disproportionately affect poorer residents, the new tax on cigarettes being a prime example. Minnesota's smokers will now pay $1.60 more per pack for the privilege of lighting up a cigarette.

Other tax changes will likely be felt more gradually, but only time will tell if these tax increases will be enough to slash the state's deficit or if spending cuts will be necessary as well.

Source: Minneapolis Star Tribune, "Minnesota taxes are more equitable now, but only barely," Editorial Board joint article, July 6, 2013.

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