Boots & Sabers

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0628, 10 Jan 17

The tax burden matters

My column for the West Bend Daily News is online. Here you go:

One of the assets of our grand republic that has allowed it to perpetuate and thrive is the fact that we are also a federation of states. Our nation was designed to have a relatively small national government with limited powers while states retain broader and deeper powers to regulate our lives. This allows each state to experiment with different policies and for other states to observe and learn from the results of those policies.

Sometimes, those experiments go very well and other states can copy them to benefit their own citizens. This was the case when concealed carry began to sweep the nation after Florida allowed it in the 1987 and saw nothing but positive results. Since then, every state in the nation has come to allow some form of concealed carry and states continue to get closer to a full recognition of the right to keep and bear arms in the form of what has come to be called Constitutional Carry.

Sometimes, however, states try policies that prove instructive to warn other states to not attempt those policies. Minnesota has just provided one of those examples that Wisconsin, in particular, should be watching closely.

Minnesota has long been a state susceptible to fits of political absurdity. It is, after all, a state that has elected such luminaries as Saturday Night Live alum Al Franken and former professional wrestler Jesse Ventura to high office. In 2010 Minnesotans elected the ultra-leftist Democratic-FarmerLabor (DFL) Party member Mark Dayton with a 43.6 percent of the vote. The Republican and Independent candidates split the remaining 56.4 percent of the vote.

Not to be deterred by his mere plurality of support, Gov. Dayton and his DFL majorities in the state legislature launched an ambitious agenda including a massive tax increase on the “1 percent” to fill a budget deficit created by overspending.

Specifically, they passed a $2.1 billion tax increase in 2013 by increasing the income tax rate for people earning over $150,000 ($250,000 for people filing jointly) from 7.85 percent to 9.85 percent. They also passed a slew of other tax increases on the middle and lower taxes, but the crown jewel of their plan was to “tax the rich” to fund their spending.

The results were predictable. Minnesota saw an immediate increase in tax revenue. This makes sense. When a tax increase like this is passed, most people have little choice but to pay it. The prospect of uprooting their families, changing schools, getting a new job and moving out of state to avoid the tax is not an option immediately doable.

But over time, all fixed costs become variable costs. When those high earners begin seeking out their next career move, one of the factors they will consider is the amount of their paycheck they have to send to the government that they would be able to keep by simply moving to a different state. That is exactly what is happening in Minnesota.

The results of the tax increase are becoming known. The IRS keeps track of when people move to different states by the flagging when people list a new resident on their tax returns. This data gives us a vivid picture of taxpayer movement because it is actual data and not just a statistical projection.

As detailed in a report by the Center of the American Experiment, the most recent IRS data available is for the year immediately after Minnesota’s tax increase and it shows a grim picture. Between 2013 and 2014, Minnesota reported its largest net loss of income in its history with $944 million of adjusted gross income leaving the state. Lest one think this is the natural flow of retirees moving to warmer climes, 63 percent of the state’s net loss of tax filers were younger than 65.

Most of the former Minnesotans are predictable fleeing to states with better tax climates like Colorado, Florida, South Dakota, Texas, Arizona and Washington. In fact, five of the 10 states to which Minnesotans flee do not have an income tax at all. It is notable that one of the places that is not receiving an outflow of high-earning Minnesotans is Wisconsin. That is because despite a few years of progress, Wisconsin remains a state with one of the highest tax burdens in the nation. Even after Minnesota’s tax increases, Wisconsin still ranks four notches worse than Minnesota on Forbes’ ranking of overall tax burdens.

The data shows what we all know. The tax burden matters. In the short run, most people do not have a choice but to pay what the government tells them to pay. But over time, choices expand and people will factor the tax burden into their decisions about their lives. Minnesota’s experiment with higher taxes is showing a way that Wisconsin should not follow. In fact, they are showing that Wisconsin should do the exact opposite and push harder to have a tax burden that actually attracts high-earners to our state.


0628, 10 January 2017


  1. Kevin Scheunemann

    Time to wipe out state income tax.

  2. Owen

    That’s a bold reform that I would wholeheartedly support. Other states can do it. Are Wisconsinites somehow less capable than they are? If Walker announced a full repeal of the state income tax, I bet he would have 75%+ of the public behind him.

  3. Le Roi du Nord

    I hope you two looked at the alternatives to no state income taxes, and how things are working in states that are already there.  Increased sales tax, increased gas tax, increased property tax, crumbling infrastructure, etc are all the result of no state income tax.  There is a lot of information out there, just look it up.

  4. jjf

    Unless you have a plan for replacing the state income tax, isn’t it just mental masturbation?

  5. penquin

    @ nord @jjf From what I understand, the idea isn’t to replace the state income tax but rather do away with the majority of state services. Welcome to Wississippi.

  6. Jason

    >Increased sales tax, increased gas tax, increased property tax, crumbling infrastructure, etc are all the result of no state income tax.  

    Sorry, but we have all of that AND state income tax.  I sure am glad you’re not my representative.  All you do is spend your time posting contrary positions to Kevin, whether you understand what he’s saying or not.  If you were an elected official in my voting area, I would be embarrassed by you.

  7. Le Roi du Nord


    Well, I am equally glad you aren’t depleting the services provided by our local government.  Up here we take pride in understanding the issues at hand.  Obviously that isn’t the case where you live.  And someone has to keep the fire to Kevins feet.  He may even learn something.

    BTW, you could do your homework and check out the ramifications of no state income tax in the states that don’t have it.  All the things I mentioned, and more are the result.  But in your case, ignorance is bliss.

  8. billphoto

    Let’s start with our local government.  Washington County passed out $200 per employee for “employee moral.”  Ignoring the fact that 3 years ago the Washington County Board passed a resolution so government employees would have pay parity with private employers BUT GAVE ZERO VALUE TO CADILLAC HEATH CARE AND A TAX-PAYER GUARANTEED PENSION PLAN.

    Why would an elite class of employee need a moral booster?  Because Washington County is awash with sales tax and tax payer money and needed to find a way to spend it.

  9. Le Roi du Nord


    Why don’t you vote for county board supervisors that lower the taxes?  Washington County is pretty conservative, you would think that those raises to boost employee moral would never happen.

    And get your facts straight on the pension.

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