You have to think about this a bit to understand what it says about a state’s economy. What the chart nominally is about is how much of a state’s income tax revenue is contributed by the top 1% of the state’s population in terms of income. Minnesota is actually down there near the bottom with only 33% of total income tax paid by this group. Now you might think, well maybe Minnesota’s income tax regime isn’t so punitive to people with high income. You would be wrong. We know by looking at the the bracket ranges and rates by bracket that in fact Minnesota has one of the very highest rates in the country and applies those high rates at a very low level. And Minnesota disallows a lot of federal deductions.
We also know that Minnesota has some of the highest government spending per capita of any state. What the chart is really saying is that to support all the spending, a huge proportion of which goes to waste and fraud, Minnesota has to reach down and tax the average person, the middle income person, at a relatively high rate. So more of the total tax burden to support that bloated and inefficient government has to come from people who can least afford it. And this study just looked at income taxes, which are progressive. Minnesota has horrific sales taxes, property taxes, gas taxes, car license fees and on and on. Those taxes are all highly regressive.
So if you wonder why people at all income levels, other than the very poor leaching off government and taxpayers, are leaving the state, this is why. It simply is unaffordable. And that affects our economy, which is sinking in the rankings. (ZH Post)
Hello Kevin.
I used to read Paul Krugman’s blog and he would post and explain statistics, and I would look up what they actually said and find out that it would actually say the opposite of what he said. I call that pulling a Krugman.
This post of yours is a super Krugman. The 1% they are talking about are federal taxpayers. What the graph says is that Federal 1% taxpayers, with the exception of New York, prefer to be warm in Florida, Texas, and California.
Think about it for a minute. If the Federal 1% were evenly distributed, then their share would be 40% (national average) in every state. Because they pay 55% of the Federal taxes collected in Florida, Florida must be chock full of Federal 1% tax filers. On the other hand, Minnesota is below the National Average, so it must be full of dirt-poor trailer trash and very few 1%’ers. I can’t believe anyone would want to live there if they were in the 1%. All I can think is that all the 1% Tax filers probably worked for Feeding Our Fraud.
I think you need to think a bit about the math, it isn’t just what is being paid by the top 1% or how many of them there are in a state. It is partly about what the average income is near the top in a state. It is also about how much state spending there is, per capita, and how the burden of raising money by taxes is spread among the citizens. Minnesota spends a ton per capita. We have a lot of wealthy people, the top 1% in income in our state is a pretty high average. And those high-income people get hit with a very high rate, I believe the second or third highest in the country, that kicks in at a relatively low level. But we spend so much that we have to raise a ton of revenue and so there is a lot of tax on middle income people especially. Obviously the no-income tax states, like Florida, get very little of their revenue from income taxes, so they really aren’t included in the analysis.
Your comment, for which I thank you, actually made me go look again at both the source material and the ZH post, both of which must erroneously be referring to state income taxes, which can’t be right and since they reference using IRS data, it is more likely they are looking at combined federal and state income tax. No one in Florida or several other states pays any state income tax, there isn’t one. And if the original material actually was state and federal income tax, then to some extent what I said about what it means isn’t quite right either, although I suspect it is still accurate. Be useful to see a more detailed analysis of state income tax burden by income deciles, for example.