The Star Tribune suggests that a return to sin taxes might provide a way out of Minnesota's budget problems.
Funny. It worked the other way before Prohibition. In 1910, 30% of the government's revenue came from taxes on alcohol. The federal income tax introduced in 1913 was used as a justification for lost revenues from banning booze in 1919.
Taxes on cigarettes and liquor would make Minnesota's tax system more regressive — unlike the proposed fourth tier income tax rate, which would pull tax revenue from the state's top earners.
Opponents of the income tax hike persist in claiming that such an increase would hurt "small businesses." In debate on the measure, Rep. Paul Kohls went so far as to say 40,000 small businesses would be affected by the tax increase.
I haven't reviewed the tax proposal in detail, but I know when we analyzed a similar fourth tier proposal last year, the best estimate was about 30,000 taxpayers had some income that could be categorized as coming from ownership in a business.
But most of the businesses that are profitable enough to put owners in the top tax bracket have multiple shareholders and tend to be larger than what most consider "small." (The Small Business Administration generally classifies small businesses [PDF] as having 500 employees, although the range is from 100 to 1500.)
A better estimate might be 10,000 businesses affected.
Of course, the GOP position and the Strib's compromise come down to: let the little guys pay.
