Yesterday, I noted that the average earner pays more state tax in Minnesota than in 42 other states. This is something which, Minnesota Department of Revenue (DOR) analyses show, got worse while Tim Walz has been governor.
The DOR produced a “Tax Incidence Analysis” for the 2019 Special Session Tax Bill and 2023 Tax Law Changes under the Omnibus Tax Bill, Transportation Finance and Policy Bill, Housing Finance and Policy Bill, Judiciary and Public Safety Bill, and Cannabis Finance and Policy Bill. There are other tax bills in other years, but Minnesota has a biennial budget process, and these are the years with the most significant tax changes.
The key pieces of analysis are these:
So, for example, in 2019, the total tax burden on the bottom 10% of Minnesota households by income rose by $9.8 million and in 2023 it fell by $78.6 million.
Using the DOR’s 2024 Minnesota Tax Incidence Study, we can estimate that each decile has 293,739 households in it. This allows us to calculate that, in 2019, for each Minnesota household in the lowest income decile the tax burden increased by $33 ($9.8 million / 293,739) and fell in 2023 by $267 ($78.6 million / 293,739). We can repeat this for each decile, and the results are shown in Table 1.
Table 1: Changes in state tax burdens in 2019 and 2023 legislative sessions
So, what about the middle class? Let us define them as the fifth and sixth income deciles, highligted in yellow, with four deciles below them and four above.
We see that the sixth income decile — with incomes between $57,680 and $74,178 in 2019 and $66,771 and $85,609 in 2023 — got hit with hikes in both sessions, for a total increase of $219 in their state tax burden.
The fifth income decile — with incomes between $44,731 and $57,679 in 2019 and $52,159 and $66,770 in 2023 — got a hike in 2019 and a cut which did not offset this in 2023 so that their overall state tax burden increased by $141 dollars over the two sessions.
And that probably isn’t all. The 2023 analysis explicitly excludes the new 0.88% payroll tax imposed to fund Minnesota’s Paid Family and Medical Leave scheme “since they are considered insurance premiums rather than a tax.” Neither does it include the hikes in local sales taxes, authorized by legislation signed by Gov. Walz.
The DOR did not conduct an incidence analysis of the 2021 tax bill. They are significant undertakings and are not produced without a request from a tax chair, as outlined in statute. It would be useful for Tax Committee chairs — Reps. Davids (Rep.) and Gomez (DFL) in the House and Sen. Rest (DFL) in the Senate — to request a tax incidence analysis of all taxes created or authorized by Gov. Walz’ signature since 2019 and insist that all taxes are included, including the 0.88% payroll tax.
If anyone wants to run on a platform of cutting taxes for the middle class, let us make sure that middle class taxes were actually cut.