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Tax the wealthy more? Plenty of peril in plan

November 9, 2012
Gary Andersen, Lee Smith , Fairmont Sentinel

Gov. Mark Dayton has long sought an income tax hike on the wealthiest of Minnesotans. He sees this as a fairness issue, believing the wealthy should pay more to help fund services Dayton deems essential. Dayton's goal of higher taxes has been thwarted by a Republican-led Legislature, which feared the impact on the economy, and which wanted to limit the overall reach of government.

Now, with Democrats taking control of the Legislature, Dayton's tax hike could be back in play. But it's far from a slam dunk for the governor.

Democrats who won seats in swing districts were not elected to raise taxes. Voters are still concerned about seeing more jobs created in the state. And part of the reason Republicans lost these seats probably stems from their focus on ballot initiatives against gay marriage and in favor of voter ID. In other words, there was no groundswell of support for higher taxes, for anybody.

The Democrats who will lead the next Legislature are talking cautiously about tax hikes. They know they are not immune to political realities, or economic ones. They are exhibiting wisdom.

Everyone should remember that the wealthy retain the greatest mobility in society. If they don't like something happening in their state, they can easily move to low-tax states, where public policy favors freedom over government initiatives. Tax hikes on the wealthy do not yield the revenue some would like for this reason and others, such as the sheltering of wealth in tax-free investments. In the meantime, while the expected revenue falls short, the state's reputation as a high-tax state grows. Businesses forego expansions. New businesses look elsewhere.

A state's goal should be simple, low, broad-based taxes. And then a state should live within its means by setting priorities, such as public safety, infrastructure and education.



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