Bracket restructuring, rate increase

In an attempt to make the state’s income tax more progressive, a bill would raise the rate on top earners.

HF1998, sponsored by Rep. Michael Paymar (DFL-St. Paul), would increase the current state income tax of 7.85 percent for top wage earners to 8.5 percent, and restructure the current three tax brackets into four. An 8 percent rate would be imposed on taxable income over $100,000 for married joint filers, with the threshold adjusted for other filing statuses.

Paymar said his bill is an attempt to reinstate a more progressive income tax, which rolls back the income tax cuts made in 1999 and 2000.

“I voted for the cuts in 1999 and 2000,” Paymar said. “It was a mistake, a mistake that I regret. This (bill) is something I think the public would think is fair.”

The new 8 percent and 8.5 percent rates would be set at 7.525 percent and 8.175 percent for tax year 2009. The delay in fully implementing the rate increase would act to smooth out withholding table changes since the withholding tables would not be adjusted for the new rates until July 1, 2009, halfway through the 2009 tax year.

The bill was laid over April 6 by the House Taxes Committee for possible omnibus bill inclusion. There is no Senate companion.

“You’re not looking at all the taxes, just state,” said Rep. Pat Garofalo (R-Farmington). “When you look at all the taxes, top incomes pay the most. No matter how you manipulate the numbers, there is no way you can possibly argue that the richest 1, 5, 10, 20 or 40 percent pay a lower percentage of their taxes than the bottom bracket. It is totally false … now you can go out to Fairyland and see what they’re paying in an alternative universe, but to sit here and argue that the richest don’t pay a fair percentage is a lie.”

“There’s no way you can tell me that’s a true statement,” countered Rep. Tom Rukavina (DFL-Virginia). “We could continue this debate, but I do live in an alternate world. I’m Bizzaro, I guess. I don’t believe that what you’re saying is anywhere near the truth.”