ECM Post Review - Seems to be some disagreement

Seems to be some disagreement

TO THE EDITOR:

There seems to be some disagreement about how much of a burden the recent $6.6 billion transportation bill will be to Minnesota families. Earlier this month, Pat Tepoorten suggested that passing the bill in times of rising prices and rampant home foreclosures was irresponsible.

State Senator Rick Olseen responded that “the truth is the average driver in Minnesota would spend about an additional $37 due to the increase in the gas tax.” Olseen went on to say that he didn’t think “that’s too much to ask for safe roads and bridges for our families”, implying that this small gas tax was the only burden these families would have to endure related to this bill.

He didn’t even mention the bonding portion of the bill that taxpayers are on the hook for, the sales tax increase or higher license tab fees that were a part of this bill. Instead of mentioning any of these other taxes, Olseen scolded Tepoorten and accused him of being irresponsible for spreading mistruths and overstating the tax impact of this bill.

Luckily, facts don’t lie and a simple mathematical exercise will uncover the truth and expose the irresponsible party.

Taking the cost of the transportation bill ($6.6 billion) and dividing this expense by the number of Minnesota families (about 2 million) results in each of these families paying, on average, $3,300 more in taxes because of this bill. However, to be conservative, let’s assume that 30 percent of the cost of the transportation bill will be paid for by non-residents who fill up their gas tank while driving through the state and by those Minnesota businesses that don’t pass along this extra expense to their customers or to their employees through lower wages. If 30 percent of the bill is paid by non-families then

this would reduce the burden on the average Minnesota family by $990 ($3,300 x 30 percent) and would result in an increased tax burden of $2,310 over a 10 year period.

Let’s compare this number to the $37 that Olseen used. Olseen was pretty vague about the time period in which the average driver would be paying this higher gas tax of $37. It wasn’t clear whether, in his mind, this was a one time expense or one that drivers should expect to pay every year, for the next 10 years. But, it seems fair to take him at his word that he truly meant a total increase of $37 since that’s exactly what he said.

So, it appears that Olseen understated the burden to Minnesota families by about $2,273 ($2,310 - $37). That’s a pretty large error if you ask me and makes me wonder if he or Jeremy Kalin, who also voted for this bill, use a calculator for anything other than adding up and promoting how many doors they have knocked on.

Bob Barrett
Shafer

Comments (8) add comment

wade vitalis: ...

Hey, Bob

I've missed seeing you on the basketball court lately - must be busy writing...

My experience has been Republicans love to aggregate taxes. It seems that by using big numbers and you make it look scary and ugly which feeds peoples emotion's and fears which feeds into people's anger about taxes.

It's a stragegy that works - so you might as well keep doing it. Right?

But aggregating the $6.6 billion transportation bill and dividing it up among Minnesota families like you have simply makes fuzzy math. And is neither accurate or helpful for anyone.

Here's why your math is fuzzy. First, not every Minnesota family has a car to pay license tabs.

And what about rental car companies at the airport or around the state who own thousands of cars?. How about companies with car fleets? And those companies hauling freight? Your math doesn't include factoring in these users.

Then there is simply usage. Which you neglected completely AND which really distorts your numbers the most.

A gas tax is a user fee. At .08 a gallon, each time I fill my 18 gallon tank, it will cost me $1.44. The more times I fill it up; the more it will cost. If I drive 11,000 miles/year and get average gas mileage, it will cost me about $40.

Who pays the rest of the gas tax? Some are non-residents as you suggest. But what about a trucker with a 100 gallon tank? It's $8 each time he fills. How many trucks are on the road? What about the farming industry in Minnesota? And how many company cars buying gas or re-imbursing employee's for gas are on the road?

You've simply no way of knowing these percentages to make a valid argument.

Then there is your "emotion math". You state an "increased tax burden of $2,310 over a 10 year period." For some reason you took 10 years of gas tax and made it one number. No one pays for all their gas all at once - so why calculate it that way?

There is something we agree on. That people are angry about taxes. Where you want to focus on the amount, I prefer to focus on who pays what amount.

The average person like you and I pay 11.9% and people making $350,000 pay 8.3%. Why is that? Why do those making $350,000 get a rebate each year while we wait indefinately?

I just don't understand why more people aren't angry about this fact.

If I earn $100,000 (I don't, but for purposes of an example) I'd pay $11,700. A person earning 3.5 times the income or $350,000 pays only 2.5 times more 8.3% ($29,050) in taxes. I have $88,300 left and they have $320,950. Why is it I paid more in taxes as a percentage of income?

I think people should be angry about taxes. But they should be angry about the disparity and inequality in the current tax system. And we ought to be addressing this issue.

Thanks for the banter.

Wade

March 26, 2008

NB Taxpayer: ...

Mr. Barrett,
Thank you for pointing out that Olseen’s response to Tepoorten neglected to mention that a “bond” is a public responsibility – while at the same time attacking Tepoorten’s failure to mention facts. It can’t be disregarded as a non-tax. It’ll be collected by some if not all of us somewhere. Fact.

Mr. Vitalis,
Let’s not be too critical of the numbers. Yes the distribution is not really “average”. However, more generally, my question to you is what business do you believe is planning to lose some money over their increased expenses? Farmers? Truckers? Car rental agencies? No. My point? It doesn’t matter the distribution of consumption whether it’s personal or business. It’ll all get back to personal expenses someplace. Mr. Barrett’s average may be closer than you think.

Every business has an identified profit margin based on expenses. Show me one business that won’t ricochet that added expense of doing business onto their customers. Any additional gas expense to a farmer will just increase the cost of corn etc. Additional expense to the delivery service will get paid by an increase in those delivery services. Pointing out deficiencies in proper distribution of the gas expense per say is irrelevant. Anyone buying gas or using a service that buys gas will end up paying this tax whether they have a car or not.

March 27, 2008

Taxpayer: ...

Hi Mr. Vitalis,

This is the second time that I have heard this taxes as a percentage of income argument from you. I would appreciate it if you would expand on your comments a bit so we all know what you are talking about. In looking at the state income tax tables the income tax rate in Minnesota is progressive meaning that the more money you make the higher percentage you pay in taxes. I don't see that percentage starting to decrease once you hit $350K, so you must be including some other figures in your calcualtions.

You seem to be fairly fond of math so could you please share with us how you arrive at the 11.9% and 8.3%? If you share your assumptions with us, it may be that we can help you answer your questions.

Also, one other question for you. All these businesses with their fleets of vehicles, the farmers and all the trucking companies who will be paying this higher gas tax now, do you suppose they will just altruistically decide to eat that extra expense and operate with a lower profit margin? or do you think that maybe they will add that into the price of the products and services that they provide so that in the final analysis we, the consumers (ie Minnesota Families - even those without cars in this case) end up paying for almost the entire tax in one way or another?

March 27, 2008

wade vitalis: ...

Taypayer guy, gal, dude, Dad, Mom person,

Obviously remaining anonymous keeps me and others from knowing who you are. Dispite that fact, I do appreciate the conversation.

This link below is a really good one of you want to find out about Minneosta taxes rankings by State. It does a good job of explaining taxes as a percentage of personal income.

http://www.house.leg.state.mn.us/fiscal/files/08taxrankings.pdf

You will also see Minnesota is ranked high in per capita taxes (you already know) and high per capita in personal income. Personal income is the amount of money we make on average. Taxes as a percentage of personal income tell you how much tax is spent and what is the resulting income benefit.

I would argue that public investments in education, transportation, research and business growth have helped create that wealth. It also supports the argument that high wealth and income folks are drawn to high goods/services states - not driven away by tax burden as most Republicans argue. Anyways, that is my point.

You'll also see Minnesota draws tax revenue from multiple sources, I think 5 total, and there is a reason I point that out.

Because in order to determine the tax impact on an individual, you need to look at something called tax incidence. This is the total tax picture - those 5 taxes I mentioned; not just State Income Tax.

When tax incidence is calculated, and the Department of Revenue is your resource for this information (it is not my assumption but rather fact), it is not progressive.

In fact, the Department of Finance reported in March 2005 “higher deciles (rich people) income growth is expected to outpace growth in tax liability, while the reverse is true for middle to lower deciles.”

So, I know you mentioned "let's not get critical about numbers", but if you want to be serious about why our taxes are so high - you have to look at the numbers.

The 11.9% is the tax incidence for folks with incomes up to $150,000. Beyond that point, they drop so that those making $350,000 and above have a tax incidence of 8.3%.

It does defy logic that they drop so significantly - I know. But this incidence issue, as suggested in the referenced Finance report from 2005 above, tells it all. We are becoming a regressive tax state. Partially because the "No New Taxes" Policy of Governor Pawlenty has been to reduce the tax burden for rich people, while ours have gone up.

If you look back to the link I sent above, you will see Minnesota's per capita taxes falling the past 3-4 years. The wealthiest folks taxes have been decreasing - but not yours and mines.

In fact, property tax increases due to cuts from the state to counties for transportation, human services and schools along with Local Goverment Aid cuts to cities like Taylors Falls, North Branch, Lindstrom, have risen dramatically.

The middle-class tax incidence has increased dramatically; which is why we need to address this tax fairness issue.

Something you and myself, a business owner and father of three, agree on - we pay TOO much in taxes! We need to have a conversation as to - why?

Something else we agree on is the cost of education - higher education costs are crazy. Loans are critical, especially those of us making middle-income money.

Which is why I'm disappointed with the TCF decision and surprised you're not. Sure - they crunched the numbers. But how can a reduced pool of lenders help the college bound? How can less college bound help the Minneosta economy? How will that help TCF grow? I would think it's a matter of enlightened self-interest.

It's not at all that TCF would lose money - they'd make a little less and assume a little risk.

But consider this as well. What does a Super Bowl ad cost - a couple million an minute? TCF has the perpetual naming rights for the new U of M Stadium for $32 million - less than 10% of the cost! TCF will gain significantly by this association in addition to their recently aquired rights to all ATM's on the University campus's...

Apparently you have no problem with the decision of William Cooper and his bank - TCF. I do. Because tax payers are paying fro the rest of the stadium.

As far as the gas tax showing up in the burger cost at my restaurant - not very likely. Most anyone will tell you that companies are loathe in a competitive environment to pass on cost in raised prices. Even for trucking and farming - the amount of cost from the tax is inconsequential.

If you refer to my link on tax comparisons, again, you will see that our gas tax/sales is one of the lowest in the nation.

Whew - I hope that's answers most of you questions and issues.

Thanks,

Wade

March 29, 2008

Bob Barrett: ...

Hi Wade

Below is a link to the tax incidence report you spoke of in your last response. It’s very interesting reading. I’m actually rather surprised that you seem to have completely missed the point of the whole article, which is that business taxes, among others, get passed on to families. That is, by definition, what the term “tax incidence” means, after all.

To say that my letter was “inaccurate” and based on “fuzzy math” is a real head scratcher for me given what I read in the document that you, yourself, introduced to the conversation. Without having read the “tax incident” article (or even knowing of it) prior to writing my letter, the thoughts I shared in my letter about households being the final resting place for the transportation taxes (or at least 70% of them) are supported very well by information contained in the document.

Did you read page 7 of the article which states that the final step in the tax incidence equation is determining the “actual burden on households”?

For you to suggest that my concept of allocating the cost of the transportation bill to each Minnesota family is “neither helpful nor accurate” is really bizarre. I understand you are trying to get Kalin re-elected but, come on, Wade?????

Olseen’s statement that “$37 isn’t too much to pay for safe roads and bridges” is either very ignorant on his part or extremely insincere. Either way, it doesn’t reflect very well on him or Kalin.

As always, I enjoy the banter, Wade. I can always count on you, Olseen and Kalin to give me good material to work with.

http://www.taxes.state.mn.us/legal_policy/other_supporting_content/07_incidence_report_links.pdf

March 30, 2008

wade vitalis: ...

Hey, Bob

I'm nursing a sore back after today - it's rough getting old...

You clearly didn't read far enough into the report. On page 83 you would have discovered 41% of business tax burden related to "motor fuels excise tax" is exported.

Fully 41% is in no way paid by a Minnesotan via incidence or otherwise.

So, start out with 41% less for Minnesota Taxpayers. Remembering this does not consider the amount of tax paid by out of state folks and truckers in transit. Which would reduce it even further.

How does that famous line go "if the legend is bigger than the truth; print the legend!". I think that statement best describes Pat's original letter and reaction to the over-ride. Which got this all started. And God love'em - which is why he wrote it!

See ya,

Wade

April 01, 2008

Nathan Mitchell: ...

I appreciated the healthy conversation, and arguments proposed by both writers. I think you both give great information. However, I think the real issue that a good majority of Minnesotans have with the Transportation tax is that they are afraid of the Democratic policies as they relate to spending. The common thread that I hear in most of Olseen's statements is "its only $37 per tax payer" or "I dont think thats too much to ask". Its only $37 dollars. The next "pork barrel" bill will be fallowed by "its only $75 per taxpayer.... and on and on. Time after time and throughout history this is what we see from the Democrats. The spending curve goes up and up. There just never seems to be and end to the tax hikes. Anytime we have a money issue, all they want to do is spend, spend, spend. Then 5 years from now we find out that somehow a communiy center,a green space, a peace garden, a bike path, and a monument got built with the funds that were supposed to go to the roads. History has scared us all.

April 02, 2008

Bob Barrett: ...

Nathan I couldn't agree with you more. The Transportation bill's impact on family budgets is far higher than any Democrat will ever admit. Shouldn't we expect the Democrats to do the simple math I did in my original letter that proved how much the impact is on an average family. If they had done this, would they still have voted for the bill?

The question goes back to my earlier post about Olseen’s statement that “$37 isn’t too much to pay for safe roads and bridges." As I said, that is either a very ignorant statement or an extremely insincere one as the cost is well over $2,000 per family, not $37.

The chat I have going on with Wade Vitalis is a perfect example of this dilema, is it insincerity or ignorance. Wade (who is Kalin's camaign manager) just can't admit that my original letter and Tepoorten's article were accurate. His information is flawed as page 83 of the report he brought to the conversation only relates to collections of gas tax on BUSINESSES, not consumers. Businesses make up only 44% of all gas tax collections( of which 59% is passed on to MN households) while MN Households make up 57.7% and non-resident households make up 2.3% (SEE PAGE 10 WADE). So the total impact on households is 83.66% which is higher than the 70% estimate I used in the letter......(57.7% (44% x 59%)) = 83.66%.

So, the question now is whether Wade..and indirectly Kalin and Olseen will admit that they were wrong about how much they underestimated the impact on families (and therefore prove their ignorance) or will they continue to argue that they are right and thus continue their insincerity on the issue.

Is it to much to ask for Mr. Olseen to write a letter in next weeks paper admiting he grossly understated the impact on families and appologizing for sticking them with a $2,200 bill while apologizing to Mr. Tepoorten for the bad things he said about him?

So

April 03, 2008

Write comment

< Prev		Next >

[ Back ]