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Bark’s Bytes #12 | We are Better Than That

The Pioneer Press reported the results of an Associated Press poll on April 14, 2011.  The poll stated that “54 percent of taxpayers believe their tax bills are fair”. In the April 19, 2011 edition of the Pioneer Press, a national McClatchy-Marist poll reported that “Americans clearly don’t want the government to cut Medicare, the government health program for the elderly, or Medicaid, the program for the poor.” It further stated that “…voters by a margin of 2-1, support raising taxes on incomes above $250,000, with 64 percent in favor and 33 percent opposed” to this action.

Yet, a vocal segment of MN citizens take every opportunity to state – Don’t raise my taxes, I already pay too much – and many of the newest MN Senators and Representatives seem to feel they were elected specifically to prevent that from happening.  As a human service professional observing the stalemate between the legislature and Governor’s office, it occurred to me that no one has offered an answer on what is the right amount of taxes to pay – just that they are too much.
Having just completed my 2010 income taxes, I decided to examine my own situation for any insights on this issue. To compute my cost of living in Dakota County and the State of Minnesota, I added my county and state taxes before dividing the total by 2 (my wife and I), then by 365 days, and finally by 24 to get to an hourly cost.  The result was I pay 48 cents an hour.  Unfortunately, this does not answer the question if I am paying too much.  I then considered what I have access to as a citizen of the state and came up with a quick list that included:  city, county, and state government services; county and state courts, local jails, and state prisons; public education; social, human, and long-term care services; police and fire protection; city, county, and state parks; and roadway, rail, mass transit, and river transportation systems to name just a few. Initially it seemed like a “good deal”, but was it?  Afterwards, I identified my top nondiscretionary living expenses such as my home, healthcare, and transportation and ran these totals through the same calculation.  What I discovered was that as an individual I pay 94 cents an hour for my home mortgage and insurance, 63 cents an hour for my healthcare copayments and deductible expenses, and 26 cents an hour for my car payment and insurance.  Comparing my hourly tax expense against these other three hourly expenses answered the question for me that I am not paying too much in taxes.  Kevin G. Hall reported on data from the nonpartisan Congressional Budget Office (CBO) in the McClatchy Newspaper on May, 5, 2011, that seems to support my conclusion.  Some of this data includes:
  •  “all income classes paid lower effective tax rates in 2007, the last year of complete IRS data, than they did in 2000” (the effective tax rate is what people pay after all exemptions and deductions);
  • ” the highest 20 percent of tax filers saw their total average federal effective tax rate fall from 28 percent in 2000 to 25.1 percent in 2007″ · (that is considerably lower than the current top marginal tax rate of 35 percent, and lower than the 27.5 percent effective rate in 1979, the first year that CBO data are available.); and
  • ” for the wealthiest 1 percent of filers, the effective tax rate fell from 33 percent in 2000 to 29.5 percent in 2007″ (the poorest 20 percent of filers saw their effective rate fall from 6.4 percent to 4 percent.).

Hall’s article provides another perspective from the Commerce Department’s Bureau of Economic Analysis that goes back to 1929 (the bureau’s data on personal income make it possible to guess roughly what portion of income goes to the taxman). Under this calculation “Americans on average saw 17.3 percent of their income go to federal taxes in 2009 and 2010.  The last time the percentage was this low was 1975, and during the late 1960s.  If you exclude social insurance taxes on wages — for Medicare and Social Security — the share of taxes as a percentage of income drops to 9.4 percent in 2009 and 9.3 percent in 2010, the lowest since 1950”.

To be fair, the Governor is planning to raise taxes not just eliminate previous tax cuts approved in the Bush administration.  His proposal is to create a fourth-tier rate that would apply to 2% of tax filers in Minnesota or approximately 105,325 of our citizens. Because the wealthy can buy anything they need or want, isn’t it time we focus on the other 5,160,890 citizens that live in the state and stop making them do with less?  It seems most of my fellow citizens agree.  In a poll conducted by the Star Tribune, and reported by Baird Helegson on May 15, 2011, 63% of the respondents said they favored a blend of higher taxes and service reductions to tackle the budget deficit with only 27% wanting the budget balanced solely through cuts.

Don’t get me wrong.  The budget deficit should not be balanced solely by raising taxes and I fully support a renewed focus on making sure tax dollars are spent both efficiently and only on essential services.  The following are just a few of the suggestions I have offered in testimony to the 2011 legislature: 

  • Reform case management.  As discussed in the February 2011 Report to the Legislature, client choice of case managers is restricted in Minnesota and the cost exorbitantly high.  By defining service expectations and restructuring rates to be in line with comparable services, not only can the state save nearly $40 million dollars annually, but clients will have a genuine choice in selecting the right advocate to coordinate their service plan.
  • Close State Operated Services.  As the Minnesota Extended Treatment Options (METO) lawsuit demonstrates, there is an inherent conflict of interest in both monitoring and managing human service programs. This aside, state-operated services cost substantially more than private sector providers and do not produce better outcomes.
  • Reduce Bureaucratic Spending.  At a time when recipient budgets and provider rates are being cut, DHS is requesting an additional 4 FTEs in their biennium budget. As an example of how “out of touch” they are with the situation, their 2011 – 2015 Strategic Plan has four goals, 19 strategies and 116 actions without a single cost reduction initiative.  Simply put, there is too much redundancy in the current system and DHS reform seems to always result in sameness at an ever increasing cost that takes funding away from recipient services.  It is time for a legislative audit to bring bureaucratic spending back in line with core values and essential services. 

Governor Dayton’s budget counts on approximately $1.8 billion from the new fourth-tier tax rate and the data earlier in this editorial validates this is clearly warranted.  To this, I would be happy to kick-in an additional two cents an hour ($175 a year) bringing me to an even 50 cents an hour for being a citizen of this great state. If every Minnesotan 18 – 65 years-old did the same we could raise another $585 million and, together with Dayton’s plan, account for nearly $2.4 billion of the budget gap leaving $1.2 billion to come from budget cuts.  Seems like an appropriately balanced solution to me.

It is time for the legislature to listen to the citizens and fairly consider the facts so that a balanced solution can be negotiated and the budget passed without a special session and/or partial government shutdown. I believe that a safe home, sufficient food, adequate healthcare, and a decent education or meaningful work are essential aspects in people’s lives that no one would voluntarily give up and should not be denied to others.  As Mondale said – “We are better than that” – and we have a choice to either make those who are most disenfranchised pay the price or consider this a moment of grace in considering the needs of fellow human beings that live in our state.