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Minnesota Showdown Over Tax Fairness

 

With a stroke of his veto pen, Minnesota Governor Tim Pawlenty blocked one of the most progressive tax plans in the nation: tax cuts for 90% of the state's homeowners to be paid for by an income tax increase on the wealthiest 28,000 taxpayers in the state. 

Analysis by the Minnesota Budget Project had shown that the wealthiest 1% of Minnesota households (those married families making more than $354,758 per year) paid only 9% of their income in state and local taxes, far less than the 12% of income paid by most middle class families in the state. 

To rectify this regressive tax system (unfortunately all too common in states), the Minnesota legislature approved a budget that created a new income tax rate of 9% of income to be levied on incomes over $226,230 for single filers and incomes of $400,000 or more for married couples.  This revenue would be used to limit property taxes to no more than 2 percent of family income, returning the difference in refund checks.  Polls showed that 72 percent of voters favored the higher tax rate for the wealthy as a way to lower property taxes, but Gov. Pawlenty chose to protect his wealthy campaign contributors rather than allow property tax relief for the middle class.

Responding to Pawlenty's veto, the legislature is preparing a pared down budget without the income tax increase, but also without the property tax relief or planned increases for early childhood programs that had also been part of the program. 

It's unfortunate that Minnesota had a chance to enact model tax fairness legislation, but instead will likely end up with a status quo budget due to the Governor's veto.

 

 

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