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1 Elizabeth Malm, Minnesota Governor Proposes Poorly-Designed Tax Reform 1 (2013)

handle is hein.taxfoundation/ffdfjxz0001 and id is 1 raw text is: FOUNDATION February 13, 2013 No. 359 Minnesota Governor Proposes Poorly- Designed Tax Reform By Elizabeth Malm Minnesota Governor Mark Dayton (D) recently proposed his 2014-2015 biennial budget, which includes $2.1 billion in revenue increases.1 Included are increased income taxes on high-income earners, a poorly designed expansion of the sales tax base, and a steep hike in cigarette excise taxes. Higher Individual Income Tax The governor's tax package would make Table I: Minnesota Individual Income Tax multiple changes to the individual Brackets & Rates, Single Filers, 2013 income tax, with those changes resulting Current Law Govenor's Recommendation in a $300 million net decrease in biennial Taxable IncomeTax Taxable Income revenues.3 The state currently has the income Rate income Tax Rate ninth highest top rate in the nation. This $O-$24,270 5.35% $O-$24,270 5.35% budget, if implemented, would add a $24,271-$79,730 7.05% $24,271-$79,730 7.05% new top rate of 9.85 percent on single ..$79,731 7.85% $79,731-$149,999 7.85% filers earning $150,000 or more. The >$150,000 9.85% measure would raise an estimated $1.1 Sour ce Minnesota Department of Revenu e.2Taxable income is adjusted billion over the next biennium4 and push gross income minus deductions and personal exemptions. Minnesota's top rate to the fourth highest in the country. Theory suggests that progressive income taxes negatively affect economic growth.5 Not only do they reduce the returns to education and the incentive to build human capital, but they also undermine the factors that contribute most to economic growth: investment, risk-taking, entrepreneurship, and productivity.6 1 Office of Governor Mark Dayton, Budget for a Better Minnesota, b..,:// LL)-1042'UL-rese tatio. [hereinafter Dayton Budget]. 2 Minnesota Department of Revenue, Minnesota Department of Revenue News Release, Minnesota income tax brackets and rates, Dec. 14, 2012, /14%2()irncome%20 tax%20brackets. df Office of Governor Mark Dayton, Budget for a Better Minnesota Presentation, _V.//wwwoMoo. t;s afiono [hereinafter Dayton Budget Presentation]. 4 Minnesota Management & Budget, General Fund Balance Analysis-January 2013 Governor's Recommendations, Expenditures by Omnibus Bill Summary (Jan. 22, 2013), ~/.,;mbs;to~ sdcb a .-umm.d 5William McBride, What Is the Evidence on Taxes and Growth?, TAX FOUNDATION SPECIAL REPORT NO. 207 (Dec. 18, 2012), 6 WlimMcBride, How to Judge a Tax Plan, TA FOUNDATION FISCAL FACT NO. 286 (Dec. 15, 2011), Scl