Rat brought up an interesting point regarding the revenue potential from creating a new top-tier tax rate on incomes above $1 million per year for the next two years as Dayton has proposed. While I pointed out that a person making $1,00,001 per year would only get hit with 4 cent bump to their tax burden, clearly someone would be paying a lot more than that to help close the budget gap.
Rat points out the scope of the revenue Gov. Dayton is proposing we collect from the 7,700 highest income earners in the State of Minnesota:
Maybe instead of wrangling over percentages, merely say this is how much additional money Dayton wants take in the form of additional taxes from 7,700 people over the next two years: $520 million.
Asking 7,700 people to come up with $520 million over two years sounds like a lot, eh? I thought it would be fun to look at how much that would hurt this group. For example, how much would they have to cough up per year, and how much do these people make in order to be able to fund half a billion dollars in state spending over two years? Here are the numbers I ran:
In a nutshell, Dayton is asking Minnesotans who make, on average, $2,688,312 per year to chip an extra $33,766 per year to the state. That’s not chump change, but it shouldn’t prevent many people making that kind of coin from taking the kids out to eat once in a while, but buying Kraft Deluxe Macaroni & Cheese for home.
Rather than limiting new income taxes to those who can most afford it, Rat suggested spreading the tax burden equally among all Minnesotans:
My solution to closing the gap between the two parties would be a temporary 1 percentage point bump in Every Tax Bracket. I’ve been told that would raise about $1 billion. We all use state services, we all have skin in the game. We all should share in solving the problem.
That’s an interesting way to look at it. For example, a person making 100 times less than the average of the 7,700 top income earners makes $26,688/year, or around $13/hour (assuming they manage to do it with one full time job rather than multiple part time jobs that pay less). A flat tax of 1% would save someone making $2,688,312 per year $16,883 but cost someone bringing home $13/hour an additional $266 in income taxes.
Rat’s proposal would increase taxes on $13/hr earners by 14.2% (7 to 8%) while increasing taxes on $1,300/hr earners by 12.5% (8 to 9%). That seems kind of regressive to me.