MPR: When? How? How Much?

When? How? How Much?
By Laura McCallum
May 7, 1999

Legislative leaders are trying to resolve differences between a $3.5 billion tax-cut plan passed by the House, and a $2.5 billion tax bill passed by the Senate. One of the biggest sticking points is whether to cut income tax rates in all three brackets, as the House plan does, or only in the lower two tiers, as the Senate and Governor support. How will some typical families fare under the two plans?

FIRST, A CAVEAT, there is no average Minnesota family, and any tax cut will vary depending on how many children you have, how many tax deductions you claim, and other factors. The median household income in the Twin Cities is about $60,000; in rural Minnesota it's about $40,000. Families earning those average incomes will get about the same income tax cut under both the House and Senate plans. A family of four making $40,000 a year will save about $100. If they earn $50,000 , they'll save about $200. But as incomes rise, the gap between the two plans widens.

Abrams: Those that have paid in the most ought to get the most back.

Republican House Tax Committee Chairman Ron Abrams of Minnetonka says it's only fair that Minnesotans at all income levels get a tax cut. Under the House plan, a couple with two kids making $70,000 a year would get a $450 tax cut, compared with $300 under the Senate plan. A family of four earning $150,000 a year would get $1,100 from the House bill, and about $600 from the Senate. And a family earning $1 million a year would get the same $600 dollars from the Senate plan, compared with nearly $5,000 from the House. Abrams says upper-income Minnesotans pay the lion's share of state income taxes, and should get a sizable tax break.

Abrams: The fact is that under the House tax bill, the upper nine percent of wage earners will get 40 percent of the benefit. But what you never hear from the Senate is that these same nine percent currently pay 48 percent of state income taxes.

Tax Plan Comparison
Family of four, filing jointly

Gross Income	House Tax Cut	Senate Tax Cut
$10,000	$0	$76
$20,000	$9	$71
$30,000	$59	$63
$40,000	$101	$101
$50,000	$196	$196
$60,000	$371	$273
$70,000	$449	$312
$80,000	$527	$351
$90,000	$605	$390
$100,000	$683	$429
$125,000	$878	$527
$150,000	$1,113	$595
$175,000	$1,280	$595
$200,000	$1,387	$595
$250,000	$1,612	$595
$500,000	$2,652	$595
$1,000,000	$4,677	$595

Abrams says Minnesota has the third most progressive income tax in the country, and the Senate plan would bump the state into first or second place, hindering the state's ability to recruit and retain quality companies and high-paying jobs. He says the arguments against across-the-board income tax cuts amount to the same tired old class warfare that Minnesotans rejected in the last election.

But opponents of cutting the upper tax bracket argue it's unfair to only look at the disproportionate amount of income tax that wealthy Minnesotans pay. They argue when you take into account all of the state and local taxes people pay - including sales, property and automobile registration - lower-income Minnesotans bear a greater burden. DFL Senate Tax Committee Chair Doug Johnson of Tower says cutting the lower-two brackets still benefits all taxpayers, but it doesn't give upper-income Minnesotans a windfall.

Johnson: The wealthy get huge cuts under the House Republican bill, smaller cuts under the Senate bill. And at the low-income end, people who go to work every day, even with this huge tax cut the House is proposing, it doesn't treat the low income people very well, as well as the Senate bill.

More than half of Minnesota households earn less than $40,000 a year. Under the Senate plan, a family of four earning $10,000 - slightly less than one minimum wage salary - would get about $75, but would get nothing under the House plan. A family earning $20,000 dollars a year would get about $70 dollars, compared with just $9 dollars under the House bill. But neither plan is likely to make it through the Legislature intact, when legislative leaders and the Governor finally compromise on the amount of the tax bill, it's almost certain to fall somewhere in between the two plans.

	Sign up to receive e-mail newsletters

	Audio help

	Text: Sm : Md : Lg