A recent report finds Minnesota tax collections are running above projections, which is good news for lawmakers who find budget belt-tightening an uncomfortable exercise. The last budget deficit crisis caused the Legislature to back away from its funding commitment to local schools. Most, if not all of the money owned to education since has been restored.
Taxpayers who have struggled to pay state income taxes sometimes have wished they lived in South Dakota, which is one of seven states that doesn't have state income taxes. The others are Alaska, Florida, Texas, Washington, Nevada and Wyoming. It also happens that Florida, Washington and Texas are gaining population faster than all others.
However, it doesn't mean it's cheaper to live in states with no income taxes. Government needs its revenue, which means sales taxes, property taxes, fuel taxes and many other fees help fill the revenue void. Only five states — Oregon, New Hampshire, Montana, Alaska and Delaware do not impose sales taxes.
Minnesota didn't have a sales tax until 1967, after Republican Harold LeVander defeated incumbent Gov. Karl Rolvaag by a razor-thin margin. The election was more or less a referendum on the sales tax, which LeVander supported.
Minnesota's tax structure goes back to territorial times. The territorial assembly established a property tax system to support schools in 1849. Property taxes remained the state's top revenue generator until the 1920s, when automobiles first gained widespread popularity. Lawmakers needed to pay for road construction and upkeep and created a 2 percent registration tax on the purchase of motorized vehicles. A 2-cent-per-gallon gas tax followed in 1925.
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The tax system worked until the Great Depression hit. Property tax defaults more than doubled, and private institutions helping the poor and displaced were swamped. The individual and corporate income tax system came to be in 1933. The state turned responsibility for property tax collection over to counties in 1967 but provided property tax relief through state aid to local governments.
Taxes — no matter the form — have never been popular. The federal and state income tax system is designed to be progressive, that is the rich are expected to pay more. A flood of legislated deductions has made income tax forms a complicated mess, which has led to calls for simplification and even a so-called flat tax in which all payers would pay the same percentage.
Congress established the first federal income tax — 3 percent for people earning $600 and $10,000 annually — in 1862 to help pay for Civil War expenses. The income tax was eliminated in 1872, returned in the 1880s and ended when the U.S. Supreme Court ruled it was unconstitutional.
The income tax became a permanent part of our landscape in 1913 when the 16th Amendment to the constitution was ratified.
The tour of taxation's history provides few clues to what the future may hold. The only certainty is the federal government always will run a deficit. That was true when the Founding Fathers discovered it costs to run a government and responded with a general tax on liquor and tobacco. Those taxes were no more popular than the system we have now.
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