A Misguided Minnesota Tax Proposal

An ad taken out last month in Minnesota’s Star Tribune called for an increase in tax rates on all Minnesotans in order to provide more funding for education and healthcare. Interestingly enough, the ad was sponsored and signed by over 200 "wealthy Minnesotans" who want the marginal tax rates hiked across the board, but especially on high-income earners, for which they want rates increased 25 percent. 

As a recent commentary in Star Tribune points out, though, a tax increase would produce the opposite of its intended effect. Minnesota recently announced that tax collections for the past fiscal year were $450 million higher than projected, an 8.7 percent increase from last year. This revenue comes mostly from receipts on capital gains and other sources of income for the upper tax brackets. If realized, the proposed rate increase would only depress the cap gains and dividends activity that is currently providing tax revenues.

The problem in Minnesota is not a lack of funding but rather the misuse of it. Providing more funding for education and healthcare is a matter of cutting ineffective, wasteful programs and making current programs more cost effective. If the wealthy 200 really want to help Minnesota, they should focus on the real problem and not attempt to stifle economic growth.