The Federal Reserve Bank of Minneapolis has released its 2008 outlook for the regional economy, and for Minnesota the short version is: not so hot.
Monthly job growth numbers, which don't necessarily indicate trends, are nevertheless concerning:
State job growth remains tepid when compared with the nation. The state is growing jobs at a rate of 0.1 percent to the nation's pace of 1 percent.
The state's jobless rate dropped to 4.4 percent in November, down from 4.7 percent in October and under the national rate of 4.7 percent. The report cited a drop in labor participation rate as a driving factor in the drop in jobless rate, which means a drop in people looking for work.
Meanwhile, a new report [Download pdf] on effective federal tax rates says the income gap between the very wealthy and the rest of America continues to widen:
The increase in incomes of the top 1 percent of Americans from 2003 to 2005 exceeded the total income of the poorest 20 percent of Americans, data in a new report by the Congressional Budget Office shows.
The poorest fifth of households had total income of $383.4 billion in 2005, while just the increase in income for the top 1 percent came to $524.8 billion, a figure 37 percent higher.
The report also shows that the top 1 percent pays the highest effective tax rate of all income groups, but between 2004 and 2005, its effective rate dropped while for the rest of households, the overall rate held steady or increased.
Calculating the gap in Minnesota
In Minnesota, the top 1 percent pay the lowest effective state and local tax rate, as calculated by the state tax incidence study [Download pdf]. The tables below, taken from the two studies, show the federal and Minnesota rates, respectively.
The Minnesota study also calculates tax incidence by income decile — that is, dividing the state's $13.9 billion income into tenths and then seeing how many households it takes to account for 10 percent of the total:
Because of their relatively low incomes, it takes 888,000 households in the first income decile to account for 10 percent of total income; in contrast, there are only 7,339 high-income households in the tenth decile, who also received 10 percent of total income.
Again using the year 2004 for illustration, the first decile includes 37.6 percent of all
households. Their share of total taxes (10.0 percent) was almost equal to their share of
household income (10 percent). First income decile households (with 10 percent of total
income) paid less than 1 percent of the individual income tax, but paid 16.5 percent of the
consumer sales tax, 22.4 percent of excise taxes, and 19.1 percent of all business taxes
borne by Minnesota residents.The tenth income decile includes only 0.3 percent of all households. Their share of total taxes (7.9 percent) was lower than their share of household income (10 percent). They paid 16.1 percent of the individual income tax, 3.7 percent of the consumer sales tax, 2.0 percent of excise taxes, and 4.1 percent of business taxes borne by Minnesota residents.
As the evidence mounts that this economy has been disproportionately generous to a few — who also pay proportionately less of their incomes in taxes — Minnesota lawmakers should look again at fairness as they consider how to pay for state services.
— Charlie Quimby
Comments