Minnesota’s High Earners Stayed Despite Higher Taxes

Published On: 18th February 2015

From the internet

When a higher income tax was imposed on Minnesota’s top earners, many opponents said this would spark an exodus and hurt the Minnesota economy.

After a review of 2013 tax returns, it was found that the number of returns filed by the top earners were higher than what was expected. This is a sign that the push by Governor Mark Dayton to raise taxes on Minnesota’s wealthy did not cause as many to leave the state as was initially thought by some.

Does this mean that the debate about income tax policy is over?

Of course it doesn’t.

It was just two years ago that the governor and the Democrat-controlled Legislature raised income taxes on individuals earning $150,000 or more or couples earning $250,000 or more.

During the debate over the tax increase plan, Republicans feared that it would run the wealthy individuals in the state out to other states with lower taxes. One representative was recorded as saying “money walks,” stating that the wealthy are the job creators; they are the large corporations and the small corporations. The fear was that they would leave to save a buck. While this may be true for some, it didn’t happen within the majority.

The Minnesota Department of Revenue states that the exodus did not happen. The state processed over 6,000 tax returns for 2013 by people who fall in the higher income brackets. This is more than projected. The Revenue Commissioner said that the economy is on the upswing and more families are doing better financially in Minnesota than what was initially estimated. It is a small amount, but it all comes down to the economy and how families are doing. If they are doing well, they don’t leave.

Over 60,500 filers were subject to the new tax bracket. Officials state that that is 700 fewer than what there would have been in 2012, but the number for 2012 is not accurate because so many individuals sold their stocks to avoid paying the higher federal tax that would have kicked in had the Bush tax cuts been allowed to expire. People got scared, started selling, and then the tax cuts never expired. This skewed the results quite a bit.

But the numbers really shouldn’t be a surprise in Minnesota since the state emerged from the recession in much better condition than most of the states. The unemployment rate dropped to just 3.6 percent and so many other factors, such as stabilization of the housing market, come into play.

The numbers did strengthen Governor Dayton’s stance on how raising the tax would not make the wealthy leave or cause damage to the economy.

One representative still feels that adding a fourth tax bracket could have a long-term negative effect. The House Tax Committee chairman has already held a hearing on a bill that would pull back the income tax increase on the higher earners. However, there are opponents because of the current stability of the state budget. Some simply don’t want to put that at risk.

Next is a move by some representatives to eliminate the Minnesota tax on Social Security income. The proposed bill phases out the tax over a five year period, which would benefit over 600,000 Minnesotans.


Source: http://www.inforum.com/news/3671951-minnesotas-higher-taxes-top-earners-sparked-no-exodus