Minnesota Ecomomy

[Tom Wetmore]

http://readersupportednews.org/opinion2/277-75/28729-this-billionaire-governor-taxed-the-rich-and-raised-the-minimum-wage-now-his-states-economy-is-one-of-the-best-in-the-country  

[Tom Wetmore]

@bonnie I would be interested in your perspective on this since you live there.  

[rudywoofs (Pam)]

Color me stupid, but could someone please explain to me why one group of people should be taxed at a higher rate on their income than another group of people?   Even God didn't say that wealthy people needed to give a 20% tithe rather than 10% because they could afford it.  This really has never made any sense to me.

[JoeMo]

It's called wealth redistribution.  Rich people subsidizing poor people.  The wealthy and independent subsidizing the poor and dependent.  Financing the government's "Don't Worry; We'll Take Care of You Program" so they can take over your life.

10 guys are sitting in a bar, drinking beer, each guy paying for his own beers. (these guys are obviously not Adventists).  They get to talking about their income; and the decision is made that - even though they all drink the same amount of beer - they should share the bar bill proportionately with their income. Those among them without an income get to drink beer for free at the expense of those with an income.  Eventually those with no income insist that they not only be able to drink for free; but that the rich guys should pay the poor guys for the honor of drinking with them in addition to buying their beer.

This is an analogy of how our taxation system works in the U.S.

[bonnie]

1 hour ago, Tom Wetmore said:

@bonnie I would be interested in your perspective on this since you live there.  

I assumed that was meant for me.  When I have more time I would be happy to give it to you

[Tom Wetmore]

53 minutes ago, JoeMo said:

It's called wealth redistribution.  Rich people subsidizing poor people.  The wealthy and independent subsidizing the poor and dependent.  Financing the government's "Don't Worry; We'll Take Care of You Program" so they can take over your life.

10 guys are sitting in a bar, drinking beer, each guy paying for his own beers. (these guys are obviously not Adventists).  They get to talking about their income; and the decision is made that - even though they all drink the same amount of beer - they should share the bar bill proportionately with their income. Those among them without an income get to drink beer for free at the expense of those with an income.  Eventually those with no income insist that they not only be able to drink for free; but that the rich guys should pay the poor guys for the honor of drinking with them in addition to buying their beer.

This is an analogy of how our taxation system works in the U.S.

That is the political explanation and terminology.  Despite common misperception rich people consume more in government services than poor people.  Unless you are a wealthy hermit living in the deep woods with your fortune buried under a rock, that is.  The reality is that the tax system has pretty much from the beginning had graduated tax rate schedule.  If it was really a truly wealth redistribution, it would actually work that way in a Robin Hood sort of system with the all or even a large chunk of the tax revenues actually going into the pocket of or being used for the benefit of the poor.  But it doesn't.    It really is a small percentage of the Federal budget that gets spent on poor people.  The huge part benefits us all, supposedly - military.  

And for those that want too jump to the the huge amount that covers the interest on the national debt, you really could say that the taxes that are paid to cover that do go into the pockets of some citizens that are invested in that debt, directly or indirectly though mention funds or mutual funds.  But guess what?  Only a very few poor people get anything out of that.  But rich people sure do.

 

But then there is the Biblical perspective - to him who is given much, much is expected.

[CoAspen]

Quote

Quote

 But then there is the Biblical perspective - to him who is given much, much is expected.

 

What! You want to bring God into all of this!

 

[bonnie]

6 hours ago, Tom Wetmore said:

 

But then there is the Biblical perspective - to him who is given much, much is expected.

As most liberals point out this is not a christian nation,nor was it founded on christian principals so the biblical direction is irrelevant. Those that believe otherwise know that was not meant as to "him that is given much,much is to be given to the government"

[bonnie]

12 hours ago, Tom Wetmore said:

 

The minimum wage is immaterial in MN recovery.  It won't be fully implemented till this year .It is around 5% of workers in MN earning minimum wage and that has exceeded the official minimum wage for a long time. Many will not receive much of a increase at all as they are already close to what it will be this year.Many that are being paid minimum wage receive far above that in tips,but technically they are minimum wage. A woman that works the early shift at our local cafe usually takes home between 20-30.00 an hour in tips+her minimum wage.We eat at Perkins frequently and it is more common than not to see a good sized tip on that table for the server. I have no idea what they are paid per hour but with tips it can't be to shabby

Roughly half of minimum wage earners work in restaurants and bars.About three fourths of those work part time and are women up to 25 years old,not supporting families on minimum wage.And that number is declining. It will hurt small businesses and the consumer the most that cannot absorb the increase.

If you increase salary by 2-3.00 and hour for entry level what amount do you raise the rest of your employees?

 

 

 

 

 

 

[bonnie]

Mn weathered the recession better than a lot of states. Coming out of it sooner without the tax increase. Short term demanding and taking more money works.The surplus will not be nearly enough to satisfy a ever growing and hungry government.It will be we have to raise taxes on the so called rich again. Politicians have a skewed idea of rich.Like Dayton they can hide their money or shelter it. His trust is based in South Dakota so he pays a very low rate of tax on it or he did. Those rich that are making 150,000 and up have mortgages,education for children,their own student loans,medical and all the other that goes into daily life.

He did manage to give a 1,000.00 to charity a couple of years ago and when confronted with that "he was so ashamed". Now I believe he gives 3%. All four of my sons pay a hefty income tax pay well above the 3% to charity he sacrifices.That does not include tithe. Yet he doesn't have the slightest problem going after the "rich" as he defines them. Those he defines as rich do not have trust funds in low tax states or the money tucked away in the Cayman Islands as he did or does.

 

[Bravus]

Progressive taxation makes sense because the poorest are using every cent they get just to feed, house and clothe themselves, and the rich are not. 

It really is as simple as that.

[bonnie]

8 hours ago, David 'Bravus' Geelan said:

Progressive taxation makes sense because the poorest are using every cent they get just to feed, house and clothe themselves, and the rich are not. 

It really is as simple as that.

It is never enough.The surplus in MN at present looks impressive but it won't be long that the sniffing around for more starts. The government does not have to live within it's means.It "progressively" takes more and more.

 

[bonnie]

Star and Tribune

By William C. Melton

 

MARCH 18, 2015 — 6:18PM

 

Last year at this time, I highlighted the major role of the inflation bias in distorting the official Minnesota budget forecasts. Minnesota has one of the strongest economies in the nation, and its budget position is enviable. However, the official budget numbers distort the picture — and the distortion is growing by leaps and bounds.

This is not the fault of the highly professional staff at Minnesota Management and Budget (MMB). They do a fine job of drawing out budget implications from a bewildering variety of information about the economy and the state's finances. Instead, the responsibility rests with the governor and the Legislature. By law, the official budget projections must include inflation in estimates of revenues, but inflation must be excluded from estimates of expenditures.

It was not always this way. Before 2002, Minnesota's budget forecasts took a common-sense approach; inflation was incorporated consistently in all parts of the budget. Every year since the law was changed in 2002, the Minnesota Council of Economic Advisers (CEA), a private-sector advisory group for MMB, has criticized the current practice as misleading. (Full disclosure: I've been a member of the CEA for many years.)

As far as I can tell, practically everyone in the state is getting a false impression of the true budget position.

After the release of the new budget numbers at the end of February, I checked a variety of news sources to see whether reports of the official $1.869 billion surplus forecast for the next biennium (July 1, 2015 through June 30, 2017) would include the crucial information that $0.893 billion of that surplus was an illusion created by the inflation bias. Unfortunately, none of the news accounts I saw included this essential corrective.

The public discussion has taken off from the official number, with no questions asked. Spending proposals and tax-cut proposals have proliferated. Many of these initiatives have considerable merit, but they should be evaluated against the background of consistent budget data — and that means a surplus of about $1 billion for the 2015-17 biennium, not the higher, distorted number.

 

If this is not done, Minnesota will start to lay the foundation for serious budget problems in a year or two. The state endured serial budget crises for years and only recently emerged into a solid financial condition. If anyone wants to return to serial budget crises, they should explain why.

It gets worse.

The February forecast included projections for the 2018-19 biennium. As far as I can tell, these projections have been ignored in all news accounts. They shouldn't have been. The official projections anticipate that revenues in the 2018-19 biennium will exceed expenditures by a mind-boggling $3.184 billion!

Here is the not-so-good news: $3.279 billion of this — over 100 percent! — is accounted for by inflation bias. In other words, the legally mandated bias transformed a nearly balanced revenue and expenditure position in 2018-19 into a colossal surplus.

It's going to get still worse.

As I noted a year ago, these very large distortions have been produced in an environment of historically low inflation. Most inflation measures have been tracking in the 1-2 percent range during recent years. Most economists expect that as the U.S. economy continues to expand, inflation will accelerate at least modestly. If and when it does, the inflation bias will produce multibillion-dollar distortions in the budget forecasts.

Budgeting is hard. However, it's crazy-hard when the official forecasts have been distorted massively. Minnesotans deserve accurate information, not budget numbers that are too good to be true. It's way past time for the governor and the Legislature to fix this problem.

[bonnie]

Larger budget surplus comes with weak economic projections for Minnesota

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By Peter Nelson | 12/22/15

REUTERS/Bernadett Szabo

Many people will be tempted to say the large surplus reflects a strong economy.

The November Budget and Economic Forecast projects a $1.871 billion surplus for the current FY 2016-17 budget, which is about $1 billion more than was projected last February. State law requires a portion of this surplus to go to repay environmental funds and to increase the budget reserve. This leaves state lawmakers with a surplus of $1.206 billion.

Peter Nelson

The forecast also projects a $2 billion surplus for the following FY 2018-19 budget. This longer-term outlook suggests the current surplus is not just one-time money, but reflects a more permanent situation where tax revenues exceed spending.

Major factors increasing surplus not tied to state economy

Many people will be tempted to say the large surplus reflects a strong economy. Indeed, in discussing the surplus Gov. Mark Dayton said, "Overall this is very good news for Minnesota in terms of the economy." The Star Tribune headline put it this way, “Strong state economy brings Minnesota $1.9 billion surplus.”

While any surplus certainly suggests a healthy economy, the major factors driving the larger surplus are not tied to the state’s economic growth. A substantial chunk of the surplus — $416 million — is due to lower than expected spending on Medicaid. The Affordable Care Act expanded Medicaid enrollment substantially, and it appears this new enrollment included a healthier group of people than expected.

A second major factor creating the surplus is higher than expected tax liabilities on 2014 tax returns. The July 2015 Revenue & Economic Update explains that “MMB economists believe the additional revenue is primarily due to larger than expected capital gains realizations and other non-wage income in 2014.” These higher capital gains realizations are almost certainly driven by national and global stock market gains and not by local economic gains.

Surplus appears alongside weakening economic projections

Instead of reflecting a strong economy, the surplus is appearing just as various economic indicators project Minnesota’s economy is weakening relative to the nation. After noting the state’s labor market has performed strongly since the end of the recession, the forecast went on to summarize a number of challenges facing the state economy.

Manufacturing, mining, and agricultural activity in the state has struggled in 2015, as Minnesota producers adjust to lower commodity prices, the strong dollar, and weak global growth. The pace of the state’s housing recovery has been slow in part due to persistently slow household formation, although there are recent signs of improvement. Moreover, Minnesota’s labor force growth remains weak, despite the fast-tightening job market. This is impeding the state’s ability to increase employment.

 

Wage growth has also been weak for several years. According to the Forecast, MMB economists “believe that without a substantive rebound in productivity growth in the forecast horizon, total wage and salary income is likely to rise slower than expected.”

Finally, the forecast also projects net corporate profits will “fall 2.7 percent in 2015, compared to 4.4 percent growth assumed in February, and that weaker profit growth in 2015 is expected to continue into 2016.”

None of this suggests Minnesota’s economy is headed toward a dismal downturn. What it does show is that Minnesota’s economy is projected to grow a touch slower than the nation as a whole. Between 2015 and 2019, the four key economic indicators used to compare the state to the U.S. — personal income, wage and salary disbursements, non-farm employment and average annual non-farm wages — are all projected to grow slower in Minnesota. For anyone unsatisfied with below average, this presents a problem.

Growth hampered by labor market nearing 'full potential'

A large part of why growth slows in Minnesota is because there are simply not enough workers to fill the jobs necessary to sustain higher levels of growth. Beyond 2017, according to the forecast, “Minnesota’s labor market settles into full potential, and job growth becomes increasingly constrained to the market supply of labor and demographic trends.”

Two key demographic trends limit labor market growth. First, baby boomers are retiring from the work force. And second, fewer people on net are choosing to move to Minnesota. Between 1991 and 2001—as shown in the table below created by the Minnesota State Demographic Center — Minnesota consistently attracted net population gains from both domestic and international movers. Minnesota continues to gain population from international movers, but has lost population to domestic movers every year since 2002.

My preliminary analysis of new IRS migration data reveal higher-income households represent a substantial portion of this net domestic loss of population to other states. On net, Minnesota lost nearly 9,000 people in tax filing households in 2014 and well over half — 5,253 to be exact — of that loss was from people in households with incomes over $100,000.

The state probably isn’t going to change the retirement equation all that much, but the state does have policy levers to attract and retain workers. As the state demographer explains [PDF], the sizable flows of people to and from Minnesota each year — more than 100,000 in both directions — “present an opportunity to change the migration equation to better benefit our state.”

Lowering taxes on workers would be a great policy to start. While there will certainly be heated competition to use the surplus in other ways, such a move is well justified to stem the increasing outflow of people and income Minnesota has experienced since the Legislature and governor raised taxes on top earners in 2013. 

[bonnie]

 

 

Minnesota's projected budget surplus drops to $900 million

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Posted: Friday, February 26, 2016 3:54 pm | Updated: 8:07 pm, Fri Feb 26, 2016.

Associated Press | 0 comments

 

ST. PAUL, Minn. (AP) — State budget officials gave lawmakers unwelcome news Friday: Minnesota's projected budget surplus has dropped from $1.2 billion to roughly $900 million, putting a squeeze on long legislative wish lists for tax cuts, transportation funding and other spending proposals.