Minn. Tax Plan Raises Question: What’s Rich?

EDINA, Minn. (AP) — Lisa MacMartin says she and her husband are well-off. Greg Ferguson thinks he and MacMartin are members of the upper middle class. Just don’t call them rich.

“No. Absolutely not,” said Ferguson, a financial planner.

But he and MacMartin, a retailer who just closed her two stores, are on track to earn enough in 2011 to qualify as wealthy under Minnesota Gov. Mark Dayton’s proposal to hike income taxes on top earners. It’s the centerpiece of his fix for the state’s $6.2 billion budget shortfall.

In asking the state’s most affluent to help out in a time of need, Dayton drew a sharp contrast with new governors in other cash-strapped states. In neighboring Wisconsin, GOP Gov. Scott Walker sparked massive protests with his bill to strip public employees of union rights and cut pensions and benefits. Similar bills loom in Ohio, Indiana, Tennessee and other states.

Even some Democrats are sounding like Republicans, with California’s Jerry Brown proposing state employee pay trims while New York’s Andrew Cuomo touts tax cuts as he seeks reductions in the state workforce.

Not in Minnesota. Dayton was born to a family that built a dry goods store into powerhouse Target Corp., voluntarily feeding community programs through profits along the way. He routinely cites studies of state taxation showing that Minnesota tax burdens fall disproportionately hardest on lower incomes.

“If we’re going to have a successful society, people need to know that other citizens are paying their same share of income in taxes, especially people at the top,” Dayton says.

His plan would affect the top 5 percent. Single filers with yearly taxable income above $85,000 and joint filers above $150,000 would see the tax rate for dollars earned above those thresholds bumped from 7.85 percent to 10.95 percent. Those making above $500,000 a year would be dealt an additional 3-percent surtax for the next three years.

Republicans at Minnesota’s Capitol blasted Dayton’s proposal, pointing out it would give Minnesota the country’s highest tax rate and suggesting it would cripple job-creation efforts.

Republican control of both legislative chambers makes prospects dim for Dayton’s plan as it now stands. But it ignited a debate about the responsibility of the state’s wealthiest amid likely cuts to social services, colleges, local governments and state agencies.

Ferguson and MacMartin think they’ll earn more than $150,000 in 2011, after a couple years of recessionary lean times in which MacMartin closed two toys stores she owned and Ferguson Financial attracted few new clients.

Ferguson, 56, didn’t vote in November’s election — he said he doesn’t like politics and felt uninformed about the candidates. But he quickly grows irritated at the thought of paying higher taxes.

“What’s my incentive for being self-employed and working my butt off to make the income I make if my taxation is going to keep going higher?” said Ferguson, sitting with MacMartin in his office in Edina, a suburb just southwest of Minneapolis that’s home to exclusive country clubs, high-end shopping and neighborhoods of mansions with manicured lawns.

MacMartin is quick to point out the couple actually live next door in Minneapolis, in a relatively modest home. Ferguson drives a 5-year-old Nissan SUV — “If I was rich, I’d be down at the Land Rover dealership,” he said — and their once-a-year vacation is usually by car rather than airplane.

MacMartin, 51, voted for Dayton.

“I think that it’s a good thing that we take care of people in our society,” MacMartin said. “I think I take a little more altruistic view of things.”

State calculations show that those near the new threshold would see tax burdens rise by about $130 while those with seven-figure incomes could face five-figure hits.

Clint Gerner, a St. Paul-based wealth manager, said he’s already had discussions with many of his wealthy clients about ways they could avoid higher taxes. He’s also considering his own options.

“My wife and I fit that bill,” Gerner said of Dayton’s standard for wealthy. “We’re business owners, and we have been looking at different options to go out of state. With a company that’s growing, we’d easily be boosted into that upper tax bracket. We’d see an 11-percent gain in our income if we moved to a place like South Dakota or Texas, even for six months of the year.”

Retirees and other “snowbirds” who split their time between Minnesota and other states could face a new tax, too.

A third Dayton proposal aimed at the rich is a property tax hike on homes worth more than $1 million. Jimmy Fogel, a Coldwell Banker Burnet Realtor who specializes in multimillion-dollar homes in the ritzy neighborhoods around the Minneapolis chain of lakes, said that would have a definite effect on the market for high-end homes.

“The thing about people in that price range is that you can almost always afford to do something else,” Fogel said. “Having a lot of money means having other options.”

Minneapolis Mayor R.T. Rybak, a defender of Dayton’s plan, doesn’t buy the theory that the rich will uproot if their income taxes rise. He fears the alternative is deeper cuts to local aid programs, which have led to round after round of property tax increases.

“We should have at least equal concern about pricing people out of their homes because the state has slashed the one program it has to lower property taxes,” Rybak said.

(© Copyright 2011 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

  • Jason

    Tax the rich sounds good, most of us are not wealthy so you would think that this would have no affect on your lives. However this is not the case, people with money have options. If you create too much of a burden financially they will go someplace else that harbors a more hospitable enviorment,taking thier money,and whatever talent with them. ‘TALENT= business / ideas / JOBS. After all I believe most gain wealth by selling something many needed/wanted.

    • helper

      Wealthy people don’t create jobs.Wealthy people just keep their money and get more wealthy.

      Trickle down economics aka supply side economic do not work. Its a myth, just like the myth that Ronald Reagen helped America, when in actuality he was the seed of destruction.

      • khan

        Spoken like a true socialist. Just remember sooner or later you run out of the other guys money.

      • Wesly

        To Khan. Helper spoke the truth. He said nothing about taking money away from anyone, try again to make a point sticking to what is said

    • PS

      The top 10% earners make about the same as the remaining 90% earners combined, they are pulling away at hyper speed, while the 90% are moving along like slugs. Keep in mind the median national income is around $38,000. If big business takes from the middle class, the government should take back!! Have you looked at the shift of property tax responsibility in Minneapolis? Residents are contributing more then corporations, about 50% more, over 10 years ago it was the other way around. Also, keep in mind that companies are now showing great profits at the expense of the middle class. Then there is increased heath insurance premiums, cut in wages and benifits, low property values, gas and food increase, and outrages increases in college tuitions (again pushing out the median earners). We are pushing out 90% of the American people so the top 10% can continue to get richer and richer. If the nations median income is around 38K, I ask you who is the middle class? Why would the republicans ask for a tax break that includes folks who make up to 2million? Big business has dolloars signs over many of the Republican’s heads! I pray that our Government goes back to basics and start representing the middle class and stop using the poor as an escape goat for big business robbery!!

      • lib

        Hi PS, the middle class have voted overwhelmingly for Democrats the last forty years, the ones who have supported unions and the regulators that have driven jobs out of this state and out of this country. You say the corporation pays less of a percentage in tax than a property owner? Perhaps that is so, but the corporation contributes to society,i.e. jobs. Your property taxes wouldn’t be high if you didn’t have to keep bailing out teachers unions. Look at your statement, see what goes to the school district. Are we a society reaping a well educated populace? Nope. Just because someone makes more money than you doens”t make them evil, , maybe more determined, maybe harder working, as a self employeed person I can tell you that more taxes means I will have to fire two of my eight employees. They deserve better, but I’ll have to pay my taxes won’t I?

  • Emily

    Tax the motivated? Tax the self-employed who are actually successful at what they do? Tax those who have worked tirelessly to get to the financial level they are at? Interesting thoughts coming from a governor who’s never HAD to work a day in his life thanks to mommy and daddy.

    These people should be getting tax breaks, not tax hikes. They should be rewarded for their insight, creativity, and financial savvy, not cut down because of it.

    Redistribute the wealth? No thanks. When the rest of the population becomes talented and insightful enough to catch up, think of how great America will be then.

    • william

      It would appear from his Bio that Governor Dayton has worked every day of his life. His money did not from his “mommy and daddy”it was his grandfather who started the business. Get your facts straight.

      • ohoh

        well william all the Daytons have reaped the benefit of Grandpa’s labor. Mark should give it all to us, we deserve his money, he has more than he needs, we are entitled to it. gimme gimme gimm.e

    • Stop already!!!

      Emily -I can’t agree more. How many of those making >$150k a year spend MANY years in school to do so? I graduated with almost $150k in student loans….sure, I can afford to pay on them monthly, but it’ll be 30 years before I’m done…it’s like a second mortgage. I certainly don’t think I should be penalized with higher taxes just because I worked hard to get where I am.

      • P-diddy

        And where do you think your student loan money came from? Did you take the ridiculous route of going to a bank and filling out a loan application (you would probably be rejected good credit or not)….or….did you go to uncle Sam and ask for help essentially borrowing money from all of us?

  • Mr T

    That’s it, I’m out of here. I have family in Florida and Colorado. I can’t keep taking all the risks and the hard work to just get it stripped to pay for promoting illegal immigration, big salaries for state workers and handouts for bike paths. I can’t afford it anymore.

    Sleepless nights hoping to keep business and family expenses going while they are scheming up plans to steal more money from me isn’t my idea of capitalism. I best leave while I still have a hat and coat

    • ken

      Absolutely! move to florida or colorado to get away from illegal immigration!

    • P-diddy

      Don’t let the door hit you on the way out, and do not come back when your healthcare sucks, your school sucks, and the educated workforce evaporates.

  • Cache

    Mayor R.T. Rybak, a defender of Dayton’s plan is part of the problem not part of the solution. He is a supporter of the illegals and welfare mooches.

    • paab

      That’s right a sanctuary city. he needs dollars to pay for the illegals.

  • Harley Mahler

    My wife and I are near the threshold and enjoy the things we need in life. One of those things is the joy of helping others in need. If we earn a bit extra through overtime and such we try to use it for others. Those high and ultrahigh income folks can help preserve community programs and maybe even give a little extra to a cause they believe in. It truly makes a person feel good. Who needs to be the richest person in the graveyard?? Peace.

    • khan

      The nice thing about charity is just that it’s charity. I choose who, where, when and how much I give. I have no problem with that. But the Government is no charity and it’s not the job of the rich to take care of society, nor is it the governments. Look at the constitution and tell me where it says the Government is responsible for the poor, the homeless, the out of work, the lazy, the drug addicts or anyone else for that matter. Up until the “new deal” all of that was deemed unconstitutiional.

      • PS

        Is it the job of the rich to undercut the middle class? Stop using the poor as an escape goat. Big business owns Washington and they have only one intention, watching out for their money. They will continue to put the tax burden on the middle class. The repoted national median income of $38,000.. the question that the government needs to answer is who is the middle class? When the top 10 percent of earners make just as much as the lower 90%, were is the surplus of money and the off set on tax burdan? The money has to come from somewhere, right?

    • sorry

      Well Harley give all your money away, that is your choice. I give 10% to my church as well as other monies to the charities of my choice. That will stop with higher taxes to keep feeding endless programs that keep creating poor instead of really helping anyone. Have you ever read the story of the goose that laid the golden egg? When you destroy the goose, no more eggs.

  • MD

    what a CROCK! Every person should be taxed the same. Just because you make more money, shouldn’t mean you have to give more back. It’s an absolute freakin joke with all these people out there expecting handouts. I am not considered over the $85K, so it won’t effect me, but this just chaps my you-know-what. I’m sick and tired of people asking for handouts!!!!!!

  • Tom Ford

    I make just shy of 100,000 a year. I am not rich. I am divorced, and have two kids going off to college. I live in a 3 bedroom home, and drive a 1999 Dodge, but according to Dayton I’m rich. Meanwhile their are people on Welfare driving brand new cadillacs, and talking on their new iphones, while im working 65 hours a week to send my kids to school.

    • Joe

      Amen Tom! Amen Tom! If we were all created equal, shouldn’t we all be treated as equals then?!?!?!

      • PS

        Yes, so make college affordable for families who make the median income of $38,000 a year. Yes Tom and Joe, we are all created equal, right???

      • Joe

        I agree, make college affordable for everyone. It’s ridiculous how expensive it is.

    • Big Baby

      Cry me a river

      • Tom Ford

        I’m not crying. I am stating the truth. I don’t consider myself rich, maybe well off, but not rich.

    • Working Hard but not "Rich"

      I hear you man. How the hell did Mark decide that 85,000 and 150,000 is “Rich”? Does he have a clue how much money a person with $85,000 in taxable income is already paying? He is a self rightious spolied rich kid who thinks he is trying to identify with and help the common man when he is actually completely out of touch with reality.

    • ken

      I wish you the best with your kids. I am not trying to be smart. But if you can by a new luxury car and afford a dataphone on welfare, I’ll give you the same advice I give everybody else who thinks that: Why not go for it? Why not bag your job, apply for welfare, buy a new car, and put your kids on student grants and loans. It sounds like a really good deal! Why aren’t you taking advantage of it? Seriously…

      • Common Sence

        He doesn’t do it because Tom has a soul.

  • BMW

    Wealthy people can better afford to shop at the malls and such. The wealthy can make more frivolous purchases and have more mad money to burn. Taxing someone with a 750k income an extra 30k a year will more than likely curb their enthusiasm a little to make retail purchases which would have a trickle down effect to the retail worker who might bring home less earned income or fewer scheduled hours because of decreased business. Sometimes I observe that some rich people have less discretionary income as it is, because they have higher expenses to maintain their estates, family and lifestyles. I would not blame these people for wanting to move if a higher income tax on the rich was instituted by Mark Dayton. This would just be another way robbing money from your kids futures.

    Personally, I do not have an issue with with a small hike in sales taxes on retail purchases to try and eliminate the state deficit. I think Tom Horner proposed that solution. A flat tax should be looked at too so that everyone earning pays a fair and like percentage. Rich and poor… a lot of people get away without paying a penny. One of the first guys I ever heard voice the concept of a flat tax was governor Jerry Brown many years ago.

    • PS

      Puke, the wealthy will continue to shop and live. A hike on the sales tax and retail purchases only puts the burden back on the middle class and poor who also have to shop on the median wages paid. How about increasing the median income? or would that too take away from the wealth of the nations top earners?

  • Nancy Jo

    Okay Tom how many welfare recipients drive new Cadillacs? Have you actually ever seen one?

    Here is the choice: The wealthier in our state pitch in and pay more or have the middle class chip in more and possibly lose their homes?

    We could also take more from those nasty middle class public workers. How dare they want to make a decent living. We could take more from our children and their education. Why shouldn’t they be able to succeed in classrooms of 31-34 children, take away their after school bussing so they can’t receive help after school, and reduce all classrooms supplies. Those over paid teachers can continue to pick up the slack. After all they make so much money.

    • Jake

      Their are teachers over paid in this state. At my son’s school the gym teacher makes 77,000 dollars a year, and does nothing but tell his students to run back and forth. The school has 3 vice principals each making 120,000 a year.

      • M

        Hey Jake – It seems the public education system failed you. Can you find the word that you used in the wrong form? I’ll give you a hint, THERE is just one…

    • Poor, public employee's

      Yes I’ve seen poor driving Cadillacs using I-phones, the “middle class” public workers? Is there a reason the workers in the public sector should make more than their equals in the private sector? What wrong with 30 – 34 kids in a class, thats how many I had in my classes and I turned out just fine. My kids have 24 in their classes, I don’t see them getting any better of an education than myself. If anything it’s worse, they review the same stuff 3 – 4 times a year. instead of learning new stuff all year. They don’t get graded on anything anymore. Everything is “needs improvement” or “mastered”
      I don’t feel bad for for “poor” teachers, I would love to get paid 12 months a years for less than 9 months work. My aunts teachers pension is 58k a year and her husbands is 65k a year, Yep I feel real bad for them.

    • sorry

      excellent argument to privatize education.

  • Owl Slocumb

    Rich people should be taxed at a higher rate because they should at least pay the same percentage of their income in taxes as the rest of us do. I know it sounds screwy, but they have loopholes to avoid some or all of their true income tax.

    “The really rich people figure out how to dodge taxes anyway.”-George W. Bush

  • Agree with BMW

    I agree with the last comment BMW left. A flat tax is one way to level the tax burden field. Why is it that as a percentage of the value of my house I pay more in taxes than someone who lives in an expensive house? If someone can afford a $1 million dollar house then they can also afford to pay the same percentage in property taxes as I do.

  • Im Not Rich
  • Melissa

    Did you read the story about a $20 million grant to the U of M so they could go stare at dirt? If you want more federal/state aid, I don’t think you need to raise taxes on anyone, just ask your government to start prioritizing.

  • Rufus

    I live off of welfare, section 8 housing, drive an Escalade & use my iphone & big screen tv with pride

    • Tired of Taxes

      Rufus: You are one of the reasons people are paying higher taxes. Our taxes give you income and pay part of your housing. If you can afford an Escalade, iphone & big screen tv how can you be eligible for welfare?

      • The Truth

        It’s called he lives illegally with his baby mama while the state supports her and her 4 kids

      • Rufus (Not Really)

        It’s called “Sarcasm”

  • Another Bob

    The top 400 (four hundred!!) wage earners in this country make more than the next million (1,000,000) wage earners.

    Being trickled on by Reagan didn’t work and it won’t work now.

    I’ve got my pile, screw the rest of you. What a way to run a country (state).

  • steve

    I hate regressive taxes. One more thing that hasn’t been mentioned here is this is yet another marriage penalty tax. If two people are sharing the same house but not married they can both make $85k each or a total of $170k, while if you’re married then it’s $150k.

    • ohoh

      hence rufus and the esclade, only rufus has many baby mama’s

  • Big Baby

    Hey Tom Ford I was only joking about cry me a river. I agree with you it’s not really fair to tax anyone excessively. We should have a flat tax & politicians that quit wasting our money

  • Common Sense

    If my wife had not been laid off last year, we would be considered Dayton Rich. That’s awesome, I work hard my whole life so are so called leaders can spread my money around to those that help their political careers. Ask yourself, what is fair? If we are going to continue utilizing this unconstitutional income tax system, Everyone should pay the same percentage. If you want more, work harder! End of story.

  • richard

    I’m in agreement with the Gov….Look at what’s happening at the federal jevel. As usual the repubs. are laying it all on the working and middle earners. They are ALWAYS protecting the really wealthy (top 2/3%) and corporations, wall st. and the insurance and drug companies; and sticking it to the rest of us. Look at what’s happening in Wisconsin. The repubs are again laying it all on the working people. Who do they think they are, trying to eliminate the collective bargining right af the states workers?You can talk about tax RATES all you want. I ask, what PERCENTAGE of earnings do the wealthy and corporations pay, compared to the middle earners.??? Shouldn’t they be paying at least at the same RATE we do??? People are waking up to what’s going on and asking “what did we do” last November. It only proves that sometimes you need to watch out “what you ask for”.

    • Dick

      You said it best, watch out “what you ask for”. Look at the twitching Bozo MN put in office!! He has about as much clue as the WI Governor they elected

    • Common Sense

      First off, you should try to learn the economic facts of the Wisconsin deal, and also the consequences if public employee contracts continue as is before you run your mouth. Would you rather have a job that requires you to be partially responsible for your own retirement and health care or would you rather be out on the street?
      Please explain to me the last time a Democrat (or Republican even) did anything that improved or grew the middle class.

  • Simple Solution

    Straight Sales Tax Only homey – those who spend it get taxed. Eliminate all tax breaks. NO Tax breaks for anyone. It really simplifies the tax system. No more H&R Block. Reduce the IRS by 99% by miking things simple.

  • Melissa

    Does anyone wonder why Obama almost tripled IRS employee workforce, whose salary is paid by taxes? My guess is he’s preparing to audit everyone, especially the wealthy. Hang onto your papers!

  • Fair Shake

    Read Freakanomics, Melissa. Many people didn’t pay taxes or are fraudelent in their reporting because there weren’t enough auditors and basically, it pays to cheat because the chance of getting caught is so low. A significant amount of revenue is never collected. I would rather have the tax cheats pay their fair share and not have my taxes go up. My husband and I fall in the wealthy category, however, take state and federal taxes off our gross income, subtract full sticker college tuitions, without any income tax deductions, and I think we more than pay our share. Why remove the incentive to work and study? My point is that the upper wage earners already pay a ton of money to the state and federal government (close to 40 percent of income).

  • Chris K

    Flat taxes for income & property sound good. How about removing the ceiling from social security & passing an amendment to create a true lockbox for those funds. End refundable tax credits too. If you didn’t actually pay that much in why are you getting a refund? How about reducing the levels of administration in our schools to cut costs? Why not end marijuana prohibition? Billions saved on enforcement costs & personal liberty restored. Cut managerial level positions from government to lean the structure. End pensions for public employees including all politicians. Fund social security &a 401k like the rest of us.

  • donjuan

    Rich is when you can use all the cocaine you want and not worry about the consequences such as drug wars on the mexican border that kill 18 people each hour

  • http://sunmotelsweethomeor.com/business-digest.html Business digest

    […] Minn. Tax Plan Raises Question: What’s Rich? Lisa MacMartin says she as well as her father have been well-off. Greg Ferguson thinks he as well as MacMartin have been members of a top center class. Just do not call them rich. Read some-more on CBS Minnesota […]

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