By Catharine Richert
To reduce the state's nearly $6 billion projected deficit, DFL candidates for governor are touting plans to cut spending and increase taxes.
Among them is former U.S. Sen. Mark Dayton who wants to bring the state more revenue by increasing taxes on the richest Minnesotans.
"I'll raise $4 billion from making the richest 10 percent of the people in Minnesota pay their fair share of taxes," Dayton said July 22, 2010 during a debate with his opponents on MPR's Midmorning program.
Dayton's projection is within range, but likely on the high end.
Before digging into Dayton's claim, it's important to note that there's disagreement over who the richest Minnesotans really are. Dayton says they're those in the top 10 percent of earners - or households making more than $136,955 annually. His DFL opponents claim his plan will hit the middle class hardest, and have proposed increasing taxes on people who earn more than $250,000 a year.
Most Minnesota households make less than $136,955. On average, they give about 12.5 percent of their income to the state, what Dayton regularly refers to as a "fair share" of taxes.
According to projections for 2011, those in the top 10 percent of earners give the state about 10.1 percent of their income. Dayton will increase the tax rate on these earners to 12.5 percent as well, which would bring in about $3.8 billion more each biennium.
What about that extra $200 million?
"Mark has said consistently that his aim is to make taxes slightly progressive," Dayton policy director Brian Klaas wrote in an e-mail. "That would account for the difference."
Back in December of 2009, Minnesota Department of Revenue tax research director Paul Wilson, told Minnesota Public Radio's Tom Scheck that Dayton's plan would likely bring in less than projected because Dayton based his analysis on the state's expected tax revenue in 2011. A more accurate benchmark are tax year 2006 numbers, which means Dayton's plan would bring in somewhere between $3.4 and $3.8 billion.
Tim Taylor, who edits the Journal of Economic Perspectives based at Macalester College, says Dayton's plan is reasonable. But he explained that increasing taxes on the wealthiest rarely brings in as much revenue as expected.
"Wealthy people have a lot of options," such as moving to another state when taxes get higher, Taylor said. "It's not that everyone does all these things. But enough people do some of them to make a difference."
Dayton's tax plan would bring the state billions more in revenue. But $4 billion may be wishful thinking. His claim is inconclusive.
Minnesota Public Radio News, Midmorning, July 20, 2010
The Minnesota Department of Revenue, 2009 Minnesota Tax Incidence Study, accessed May 12, 2010
Minnesota Public Radio News, Tom Scheck interview with Minnesota Department of Revenue Tax Research Director Paul Wilson, accessed July 29, 2010
Minnesota Public Radio News, Fact check: Mark Dayton wants to tax the rich but how much?, by Tom Scheck, Dec. 8, 2009
Interview, Tim Taylor, Managing Editor of the Journal of Economic Perspectives, July 29, 2010
Interview, Brian Klaas, policy director, Mark Dayton, July 28, 2010
PoliGraph is a regular series of reports that checks the veracity of politicians' claims. It is a collaboration between Minnesota Public Radio News and the Humphrey Institute at the University of Minnesota.