Governor Dayton and President Obama say yes; 43% is too low and is an “unfair” tax rate. Of course, they don’t think a 43% marginal income tax rate on working is a harsh, unfair punishment for working harder or longer. The Governor’s and President’s opinions are crystal clear. In their view, a whopping 43% marginal income tax rate is a giveaway to the rich.
Governor Dayton and President Obama propose increasing the marginal income tax rate for working on the highest income brackets to 55% next year from 43%.
The Dayton-Obama 2012 rates include 39.6% federal income tax, 2.9% Medicare, and 13.95% Minnesota income tax. The 55% combined marginal income tax rate is the result of a minor adjustment for some limited federal deductibility of state taxes under the Pease provision of President Obama’s budget.
The arguments for tax hikes are laughable once the people learn that the current combination of the top tax bracket’s federal and Minnesota income tax rates on working is already 43%!
Both executives’ budgets cleverly try to hide both the large combined effects of layers of federal and state income tax rates and the gigantic higher combined federal and state tax rates that they propose. The Governor and President don’t want the media to report that our current tax rates are high, and that they want to send marginal income tax rates skyrocketing. Both Governor Dayton and President Obama omit the proposed combined federal and state marginal income tax rates from their budgets. Governor Dayton always omits federal taxes paid and state and local taxes paid by Minnesotans to other states to skew his view of tax incidence. The existing tax code as a whole is highly progressive without any additional tax hikes.
Any honest discussion about these tax proposals must start with the fact that under the Dayton-Obama budgets the combined Minnesota and federal marginal income tax rate would hit 55%!