IN JUNE, more than 200 wealthy Minnesotans called for a tax hike—on themselves. The proposal, published as a full-page ad in the Star Tribune, laid out a plan for raising $2 billion in revenue for spending in education, health care, and transportation, among other things. Critics suggested the signers could send Governor Pawlenty their checks anytime, but Joel Kramer, a former Star Tribune editor and publisher and founder of Growth & Justice, the nonprofit group behind the proposal, disagrees.
Don’t high taxes drive people out of Minnesota and stifle economic growth?
We recently looked at income migration—the combined incomes of people relocating to a particular state, versus the total income of people leaving that state. We found there was no correlation between income-tax rates and whether people are moving in and out. Minnesota has a slight negative flow, but that’s generally true of all cold-weather states.
What’s “unfair” about the current tax system?
The best way to look at how much a household pays is to combine state and local taxes. For the average family, according to state data, that amounts to 11 percent or more of total income. A family making $400,000 a year, however, pays in only 8.4 percent of its household income.
But why should higher-income families pay more? Aren’t they getting the same amount of government services?
You can argue that the benefits of government flow mostly to the wealthy. They benefit from a system that protects property and creates a workforce.
You want to raise $2 billion. How?
The top 2 percent of Minnesotans with the highest earnings would pay about 2 cents more per dollar earned. Most Minnesotans would pay a penny per dollar more—and families earning less than $45,000 would pay almost nothing. It’s a proposal for discussion. We’ve asked candidates to adopt it, and to implement it. But we’re not interested in a constitutional mandate.
As a share of personal income, state and local government spending is about $3 billion smaller than it was a decade ago. Isn’t that a sign of efficiency?
It would be a sign of efficiency if we were getting the same results for the same amount of money. But we’re losing ground: we have more people without health insurance, college tuition is rising, traffic congestion is getting worse. We’re not investing. And economic growth is linked to investment.
It’s election season. What does your group hope to achieve?
Our aim is to inject discussion about taxes and economic growth into the political debate. It’s not a matter of counting candidates; it’s more important to get members of the public talking and to focus on the investment agenda.
Can’t charitable investments accomplish the same thing?
Philanthropy is important, but it’s no substitute for government investment. If everyone who signed our ad contributed the additional amount we’ve proposed, that adds up to just $4 million. That’s not going to fix the bottlenecks on the crosstown and provide health care for all Minnesota’s children.
“Tax-the-rich” sounds decidedly liberal. Is this a partisan issue?
Our goal is not to line up with any orthodoxy, but to find out what will work for Minnesota.
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