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Friday, May 13, 2005

Fact Check: Highest taxed state

Posted by: Hammer / 2:35 PM

The Minnesota Republican party has been airing television and radio advertisements that claim the DFL's tax plan would make Minnesota the "highest taxed state":

I don't think that's true. The ad's been on for a week, so I figured somebody would've debunked it by now: Minnesota Politics, Minnesota Liberal, MN Lefty Liberal, Pawlenty Exposed, MN Publius, The Power LIberal...somebody. Minnesota Politics does provide an excellent chart on who pays taxes in Minnesota.

Page 15 of that report shows that the total effective tax rate (taxes paid divided by total income) for Minnesota in 2002 was 11.3% (page 15). In total, $17.2 billion state and local taxes were collected (page 17).

According to the Tax Foundation, Maine has the highest total tax incidence at 13.0%. The same organization ranks Minnesota 10th in total tax burden, at 10.7% for 2005. Minnesota's total tax burden has fallen from 11.3% in 2001 to 10.7% in 2005.

Time for some algebra and estimation. In 2001, the total income for the state of Minnesota was $152 billion (Divide $17.2 billion by 11.3% from the tax incidence report). If income has increased by 2% each year since then, the total income for the state of Minnesota in 2005 would be $164 billion. Multiply that by 10.7%, the tax rate determined by the Tax Foundation. That's $17.6 billion. Add 700million -- one half of the $1.4 billion biannual tax increase, I think that's the correct figure, but I'm not Paul Krugman -- and you get $18.3 billion. Divide that by the $164 billion and you get 11.1% total tax rate. According to Tax Foundation, an 11.1% tax rate would place Minnesota in a tie for 6th with Vermont. Maine, New York, Hawaii, Rhode Island, and Wisconsin would all have higher total tax rates.

(Note: Even if you include the full $1.4 billion instead of $700 million, Minnesota would not have the highest tax rate. In that case, Minnesota would be tied for 4th with Hawaii.)

Fact check: the GOP ads are false. If the tax increase passes, Minnesota will not be the highest taxed state.


Also, check this article for a more accurate picture...

"High Tax" State is Only Average, December 2004, HTML or PDF

This opinion piece takes a closer look at tax rankings, and finds that when looking at a more comprehensive measure of the size of government, Minnesota ranks in the middle of the 50 states.

By Anonymous Anonymous, at 11:23 PM  

There are dozens of ways of measuring the "highest taxed state". I even found one news report where Mississippians were arguing whether they lived in the highest taxed state (average incomes are so low in Mississippi that the relative tax burden is higher than one might expect for a low-service state).
In the end, "highest taxed state" is mere puffery: scare words without meaning. It's up to the DFL to explain the value of the services provided.

By Blogger Hammer, at 7:36 AM  

Do the figures provided here and else where make any ajustment or take into consideration that the name of some taxes are now being changed to "User Fees" ?

By Anonymous Anonymous, at 8:38 AM  

It's nice. Although i also have a little confused...

By Anonymous iPad 3 Cases, at 5:02 AM  

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