Mark Dayton's Minnesota budget: Taxes

Several days ago, Minnesota Governor Mark Dayton, (who did NOT take six months to be sworn in, - I'm looking at you, Al Franken!)  released his proposed budget for the state of Minnesota.  Here's a summary of his budget:

• Through increased income tax and property taxes, the richest 5% of Minnesotans will pay an additional $4 billion
• Education: Increased funding for K-12 education by $37 million, mostly to fund more full-day Kindergartens
• Early Education: Funds a quality rating system for early child educators
• Health Care: Eliminate eligibility for MinnesotaCare for people making over $20,000 and raise the surcharge on health care providers
• State Agencies: Reduces state workforce by 6%
• This is not a part of the budget, but Dayton is also proposing $1 billion for new public works and construction spending.

Keep in mind that Minnesota currently is $6 billion in debt, and Republicans currently control both houses of the Minnesota legislature.  Since it's getting late, tonight I'm only going to talk taxes.  I'll try to make some more posts in the coming days about the other parts of the budget.  So here goes:

I have to give credit to Dayton for having the guts to raise taxes, which is never a politically popular move.  Despite what republican politicians say, lowering taxes is among the least effective ways to stimulate the economy.  For proof, check out this table from the nonpartisan Congressional Budget Office!

As you can see, tax cuts to lower/middle income people come in with a multiplier of .6 to 1.5, tax cuts to high-income people have a multiplier of .2 to .6, while on the high end "Purchases of Goods and Services by the Federal Government" has a multiplier of 1 to 2.5.

So what do all these multipliers mean?  Basically, if you want to stimulate the economy in the short run (which god knows we need right now...), a tax cut is among the least effective ways to do it, while increasing government spending is the best!  In addition, it's hard to argue that the richest 5% of Minnesotans will be seriously hurt by a tax increase.  Cry me a river, and buy one less yacht.......