Show a little love for Minnesota by having fairer taxes for the rich

(Clarification posted Nov. 13, 2008: A state Department of Revenue warning that data anomalies and measurement problems may have led researchers to overstate the tax rate for the poorest 10th of Minnesota taxpayers.)

"To whom much is given, much will be required."

Jesus said that, according to St. Luke. And next year's Legislature may second the motion by increasing taxes on Minnesota's wealthiest people.

Tough times call for tough measures, and Minnesota can't afford to subsidize the rich anymore. It's time for the rich to be taxed at the same rates paid by the middle class and the poor.

"'Taxes' is not a fun word, but the delusion that we can cut them for the wealthy without having serious consequences is over," says Brian Rusche, executive director of the Joint Religious Legislative Coalition, an inter-faith advocacy group pushing, with other organizations, for a return to a fair tax system in Minnesota. "Those who have benefited most from the blessings of our free market should pay more. Now, they pay less."

A lot less.

The wealthiest 1 percent of taxpayers pay combined state and local taxes, including business taxes, at a rate that is a third lower than rates paid by the middle class. And it's not an unimportant difference: Raising tax rates on the richest Minnesotans to the rates paid by their less wealthy neighbors -- back to the rates the rich used to pay -- might boost state revenues by as much as $1 billion at a time when the state is predicting billions in deficits.

The good news is that tax fairness is popular again.

This fall's presidential campaign has included a loud debate over Barack Obama's plan to cut taxes for the middle class while raising taxes on the wealthy, which Obama defines as persons making more than $250,000 a year. John McCain has attacked Obama's plan, and proposed to cut everyone's taxes (the rich would save the most) while increasing the government deficit.

His arguments prevailed through recent economic fat times in America.

But with the financial system in disarray, the Old Tax Elixir has lost its kick: Polls show Americans like Obama's plan to un-do tax cuts for the wealthy and provide tax relief for the middle class.

That debate won't end with Tuesday's election. It is coming soon to a Legislature near you. And there are 4 billion reasons why it won't go away.

That's the worst-case state budget deficit -- $4 billion -- being discussed as the state grapples with how to keep basic functions of government -- education, health care, public safety -- funded during a recession that could bring high unemployment, falling revenues and increasing needs. Officially, the forecast calls for a $1 billion deficit, but that is expected to become a $2 billion shortfall, and could balloon far larger.

With state reserve funds already depleted, and Gov. Tim Pawlenty still duct-taped to his swivel chair by No New Tax extremists, state departments are preparing spending cuts for an already shriveled state at the exact time that government spending may be the only thing shoring up the economy.

Wealth has not trickled down, as it was supposed to. So tax justice should burble up.

"What is different this year is that most Americans understand that people at the top are not paying their fair share," said State Rep. Frank Hornstein, a Minneapolis DFLer. "The right wing will object, but their objections aren't sticking anymore. People want the rich to pay their share. That's all it is."

We haven't had tax fairness for a decade in Minnesota, going back to the Ventura administration when the state slashed rates for the rich. According to the state Department of Revenue, Minnesotans in the middle 60 percent of taxpayers -- those earning between $27,505 and $93,487 --will pay more than 12 percent of their income in taxes next year. The bottom tenth of earners, those making under $12,259, will pay a shocking 19.3 percent.

Meanwhile, the top 1 percent of earners -- making $457,000 or more -- will pay just 9.3 percent in taxes. The rich get richer while the non-rich help carry their load.

Restoring tax justice in Minnesota will, no doubt, be called "soaking the rich" by some. But it is just a matter of fairness. And, perhaps, survival.

If a fairer tax system does come about, it may be because state leaders are scrutinizing the budget projections, not the New Testament. But they still will be doing the Lord's work.

ncoleman@startribune.com • 612-673-4400