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Capitol View®
Catharine Richert

PoliGraph: Thissen’s tax claim mostly true

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A report this week from the Minnesota Department of Revenue has given Democrats new ammunition in their battle against Republicans over taxes.

Republicans often claim that Democrats raised taxes to the detriment of all Minnesotans during the last session.

And while it’s true that Democrats did raise income taxes on the state’s top earners, cigarette taxes and some business taxes, House Minority Leader Paul Thissen said the latest revenue department report doesn’t support Republican claims.

“Tax rates are actually decreasing for… 90 percent of Minnesotans,” Thissen said on the House floor. “Between 2012 and 2017, their taxes, because of changes we made during the last legislative session among other things, are actually going down.”

Effective tax rates are going down, though not by much. And while the Legislature's actions play a role, so does the state's improving economy.

The Evidence

Thissen is referring not to income tax rates but to effective tax rates, meaning the net rate you pay that includes all taxes.

According to the latest tax incidence study, those rates are dropping – but not by much. In 2012, the average effective tax rate was 11.5 percent.

Assuming current law and economic outlook persist, the average effective tax rate is projected to drop to 11.4 percent by 2017.

Effective tax rates are declining for most Minnesotans, except for the very wealthy. Lower income Minnesotans will see some of the most significant declines.

But the big question is why effective tax rates are going down.

In his statement, Thissen alludes to “changes [Democrats] made during the last legislative session.”

There’s truth to Thissen’s claim. Democrats passed a working family tax credit, for instance.

And the department report points out new property tax refunds are also a factor in the decline. Those refunds were passed during the last legislative session.

Thissen mentions there are other factors at play as well, but doesn't go into detail.

Here's a big one: an improving economy and higher incomes, a factor that's largely out of the Legislature's control.

Minnesota Department of Revenue Commissioner Cynthia Bauerly said the combination of new tax credits and refunds passed by the Legislature in the last session combined with higher incomes "really does effect that effective tax rate dramatically."

The Verdict

Thissen’s claim is mostly correct, but only because he chooses his words carefully.

He correctly characterizes the contents of the revenue department report. And he points out that effective tax rates are going down due to new laws passed in the last session "among other things."

The main "other thing" is higher incomes, and it's a factor worth discussing because it's also had a large impact on effective tax rates.