The best thing that can be said about butchering chickens is?
In the past several years, a constant stream of rhetoric has been used in regard to the tax rate that the richest Minnesotans and Americans pay.
"You can't keep taxing the rich."
"You can't keep raising taxes on job creators."
"Taxes keep going up and up and up."
"If you raise taxes on the rich, they'll leave."
"We can't soak the rich yet again!"
One problem: those statements are factually false. The top tax bracket -- both in Minnesota and in the U.S. -- has gone down in recent years. Down, not up. Down.
Now an honest debate over how much spending and how much revenue (taxes) are part of any balanced budget equation if always healthy. If the Legislature or Congress can balance the budget with cuts alone, that's great. But let's not delude ourselves about what reality is: we've been cutting taxes on the rich for years, and they now pay a lower effective rate than poorer people.
Here are the top tax rates in Minnesota and in the U.S. over the past 13 years:
Year: MN rate U.S. rate
1998 8.5 39.6
1999 8.0 39.6
2000 7.85 39.6
2001 7.85 39.1
2002 7.85 38.6
2003 7.85 35.0
2004 7.85 35.0
2005 7.85 35.0
2006 7.85 35.0
2007 7.85 35.0
2008 7.85 35.0
2009 7.85 35.0
2010 7.85 35.0
So where are these crushing tax increases we keep hearing have happened every year? Well, for the upper brackets, it hasn't happened. For the rest of us, property taxes and other regressive taxes (meaning they fall disproportionately on the less-well-off) have gone up. In fact, a 2011 study showed that when figured together, local and state taxes are paid at a lower rate (10.3 percent) for the richest 10 percent of households than for the bottom 90 percent (12.3 percent.) The same thing has happened at the national level. The federal effective tax rate (the amount they actually pay, not the amount they're supposed to pay) had fallen for the richest Americans from 26 percent in 1992 to just 17 percent in 2007.
This is not to bash the rich or start class warfare. It is to simply point out that when people use terms like the rich are getting "battered" or "taxed to the hilt," it's just not true. People may think it feels true, but numbers don't lie, and those are the numbers.
When the rich once paid 90 percent of their income in federal taxes (as recently as 1963), and 70 percent in the 1980s, top tax rates of 35 and 7.85 percent now don't seem like that horrible of a deal.
And with presidential candidates talking about cutting that ultra-rich top tier tax rate down to 20 percent, which would balloon the deficit they pretend to care so dearly about, the deal just keeps getting better for the already well-off.
This is just the income tax. The "estate tax" or "death tax" has also been cut from 70 percent in 1981 to 45 percent today. And dividends, which were traditionally taxed at the rate of income (see above, 90 percent in 1963 and 35 percent today), are taxed at just 15 percent.
"Soak the rich"? Where's the evidence of that? We should all get so soaked.
But what about the argument that if we raise income taxes on the highest bracket by 2 percent, the rich will flee the state in droves for a low-income-tax state? They'd probably choose a 0 income tax state and bring all of the jobs there, right?
Nevada, for instance, has no state income tax. So by this logic, Nevada should be busting at the seams with all those jobs the fleeing millionaires brought, right?
Nope. Nevada has the highest unemployment rate of all 50 states.
The Pioneer Journal editorial represents the collective voice of the paper's editorial board. Today's editorial was written by Steve Schulz, editor and publisher.