MN TAX HIKE: What are the implications? - FOX 10 News | myfoxphoenix.com

MN TAX HIKE: What are the implications?

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ST. PAUL, Minn. (KMSP) -

Here's the breakdown: If you're married making more than $250,000 a year, you're paying an extra $416 dollars a month or $5,000 in taxes. A single person making $150,000 or more, you pay an additional $250 a month. Some are saying this is unsustainable if only a few carry the burden.

Shortly after Gov. Mark Dayton and Democratic lawmakers agreed on a two percent tax hike on the rich, the numbers are still being processed and debated.

"The Republicans are saying that we should not be taxing as much as we are, that we should be lowering expenditures. The Democrats come back and say yes, we are increasing expenditures on education which is an investment for the future," tax expert Jay Kiedrowski said.

It is projected to bring in close to two billion dollars in the next couple years to help deal with the budget deficit, education spending, and property tax relief.

"If I were in that group, I'd be thinking, ‘Why is the governor picking on me?' But I think we have to remember that they did receive a decrease in 1999. Minnesota has always been a high tax state," Kiedrowski said.

This group being impacted right now is exclusive: The CEOs, the chief financial officers of corporations, some wealthy doctors, Kiedrowski said.

The state of Minnesota has approximately two million households, and this is going to affect about two percent of them, so we're talking about this tax falling on about 40,000 households in Minnesota.

Economist David Vang says this plan makes sense near term, but is probably unsustainable.

"The taxes have to be spread out over a large number of households kind of as a diversification effect so that we are not heavily dependent upon just a tiny minority of people providing most of our tax revenue," Vang said.

Vang says people in high income brackets also have more volatility in their incomes because of stocks and the uncertainty of running a business.

"We might have an issue going on down the road if some of these 40,000 households become too effective in sheltering income or actually move out of the state," Vang said.

Kiedrowski says ultimately, we'll have to wait and see how this all plays out.

"It's a question of equity, and the governor and the legislature have staked out their ground thinking the rich should pay more in Minnesota. It's up to the voters to decide ultimately if that was the right approach or not," Kiedrowski said.

The tax hike goes into effect on July 1 and would make Minnesota one of the highest-taxed states for the wealthy, placing it in the top four.

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