The Minnesota Government Shutdown

How far will Republican lawmakers go to protect millionaires? Those who think a default on the federal government’s credit seems implausible should take a sobering look at the “closed” signs dotting Minnesota. The Republican Party there readily shut down the state’s government on Friday by refusing to raise taxes on the 7,700 Minnesotans who make more than $1 million a year.

Gov. Mark Dayton, a Democrat, campaigned for office last year promising to raise taxes on high earners, so it was no surprise when he proposed a tax increase on families making more than $150,000 a year to help close a $5 billion budget gap. In negotiations with the Republican majority in the Legislature, he compromised and reduced the increase to those making $1 million or more, but Republicans are refusing to consider any income tax increase.

Antitax Extremism in Minnesota

It’s truly sad that the above paragraphs make sense to some. Let’s look at this in closer detail. The NYT editorial board thinks that the budget can be closed by taxing the wealthy. This is a common disease among the left. They think that problems can be solved simply by “taxing the rich.” Well – let’s look at this shall we. According to the NYTs there are 7,700 Minnesotans who make more than $1 million a year. Let’s assume that’s true. Governor Dayton was willing to cut two billion in services provided those making over a million would pay for the rest? How much would you have to raise taxes to collect three billion off those 7,700 families? Assuming the average earning of these millionaires is 1.5 million (it’s probably much less than that) their total income per year would be 11.5 billion. To close the gap from these millionaires you would have to take another 25% of their earnings.[See Footnote] The current tax rate is 7.85% for those making over 74,651. To meet Governor Dayton’s goal their state tax rate would quadruple to over 34%.

Any guesses on how many of these millionaires would leave Minnesota? Any guesses on the difficulty on attracting businesses and wealthy people to relocate to Minnesota? Funny how those questions never cross people's minds.

One of the reasons China is doing so well is that they have learned (as too many socialists, umm progressives, urr, make that liberals have not) that redistribution of income hinders wealth creation. I’m not suggesting that we go the China route – only that one of the reasons China is doing so well is that they understand that the massive redistribution of wealth, as espoused by Minnesota’s Governor Dayton and the NYT's editorial board, doesn’t work IF you are trying to build wealth.

FOOTNOTE:

11,500,000.00 (7,700 * 1.5 million)
3,001,500.00 (desired extra 3 billion in revenue)
0.261 (tax rate required to raise revenue)