Thursday, June 22, 2006

They don't need it, but the rest of us do

Posted by Craig Westover | 6:06 PM |  

Tip of the Sou’wester to Triple A for pointing this out --
Wealthy Minnesotans: We'll Pay More Taxes

(AP) Minneapolis Several well-off Minnesotans who believe more tax money should be pumped into public initiatives said the state can start with them.

More than 200 wealthy Minnesotans signed a full-page ad appearing Thursday in the Star Tribune asking the state to raise $2 billion for various initiatives by increasing the state's tax burden for high-salary earners.

"We need to invest more in our future," said Joel Kramer, former publisher of the Star Tribune and founder of the think tank Growth and Justice, which organized the "Invest for Real Prosperity" fiscal strategy.

The new money should be used to improve educational opportunities, provide affordable health care and fund transportation needs, Kramer said.

Jim Pohlad of Marquette Financial Company, Richard McFarland, retired chief executive of Dain Rauscher, and Lee Lynch, former chief executive of Carmichael Lynch, were also key contributors to the proposal, which would make those earning more than $275,000 pay another 2 cents in state taxes for every dollar earned. That would be another $6,000 in taxes for someone earning $300,000.

State taxes for anyone making less than $45,000 would not increase and the rates would vary for everyone in between. Kramer said he hopes the ad will create public interest and discussion, perhaps leading to legislative action.

He also acknowledged that if the tax increase was approved, it would take "some faith in government" to trust that the money would be appropriated according to the group's requests.

So what’s wrong with this picture? Obviously these guys don’t need the money they’d gladly send to the state, but the rest of us do -- and we don’t need the government to give it to us.

The point that is missed in the tax the rich scenario is that while rich folks have more money than they know what to do with, they don’t bury the extra cash in a coffee can in the backyard or hide it under the Select Comfort. The spend, save or invest it.

If they spend it, it flows back into the economy at full value. For example, if they buy a $700,000 home, they get a $700,000 home. If the government collects $700,000 and builds seven homes, each home will be a less than the expected $100,000 because of government taking its administrative cut and the inefficiencies of bureaucratic functioning.

If they save it, that money becomes available for others to borrow and either spend, same results as above less the cost of interest, or invest in a business. The latter increases the value of the money more than simply spending it. The rich guys may not need their interest, but the rest of us need the jobs created by the new businesses borrowing the money or the increased business generated by consumer borrowing.

If they directly invest it in a business, again wealth is created. All those seniors living on 401Ks and retirement funds benefit from a healthly stock market.

The latter benefits are far greater than giving government more money to play with.

(Just a thought, but if all these rich guys have cash lying around, why not send it to Jim Pohlad for his ballpark fund and drop the tax increase on Hennepin County.)

Update: Pawlenty encourages ad signers: Send a check