National & Minnesota Report
An erroneous Instagram post about Maine Governor Janet Mills’ (D-ME) withholding of Federal Dollars, sparked an interesting idea, the possibility of not forwarding federal income tax collections in lieu of the monies owed to the states by the Donald J Trump (R) Administration. We have often thought when paper transactions were the common route for exchanging money of paying bills, such as federal income taxes, where you send in a check and they in turn return a check was a waste of time, energy and effort. Now, with electronic filing and return deposits directly into ones bank account this process is eliminated.
Since Minnesota’s budget receives nearly 1/3rd of its revenue from the Federal Government and that is currently in jeopardy, we see a few approaches as possible. First, Federal Tax Conformity is a normal process our states and all others goes through when establishing our state’s compliance with Federal Law. Now, there is a process, first the Feds must pass a new Tax Bill, which is still pending. The lynch-pin being whether there will be a stand alone Tax Bill, or the Republican controlled US House will succeed in convincing the Republican US Senate to fold these tax provisions into a Budget Reconciliation Bill or not.
Then depending on the timing, meaning before or after the MN legislative session adjourns, the legislature can, but doesn’t always do so, reconcile the Federal Tax structure into our state’s budget through Tax Conformity. Often times, a lag means more state revenue is collected because the write-off of federal taxes for corporate and personal income tax is lower. So the reconciliation tax shell game commences.
Additionally, there is the blanket opposition of the failure of the federal government meeting it full obligation, as in the case of Special Education compensation, where the bar is set at 40% of the costs, but actual level of support 12%. The federal funding has not keep pace with the rising costs since first established on December 2, 1975 as the Individuals with Disabilities Act (IDEA).
As a state, Minnesota sends more money to Washington DC then it receives back so a withholding of the amount would have a direct beneficial impact.
Of course there is always the fringe argument, which is the passage of Federal Income Tax in 1913 through the 16th Amendment to the US Constitution “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” Now, this might align with the wrong-headed believe from the misguided Chief Executive, who fails to tell the truth about the costs of tariffs as being born by the countries they are applied to rather than truthfully be American consumers.
A friend of Checks & Balances often jokes, “When Trump attended Wharton, he only went for one day, and they discussed the use of tariffs, but it was on the second day they discussed the true adverse impact of such as system.” We also, say Trump also only attended his US History class for one day when they discussed the use of a tariff system prior to the 16th Amendment, and once that was implemented the tax rate for the wealthy was established at as per our reading from the Annenbergclassroom.org:
1913 First Income Tax Is Levied Under The Sixteenth Amendment
Soon after the Sixteenth Amendment is ratified, Congress levies a 1 percent tax on personal incomes greater than $3,000 and a 6 percent tax on incomes above $500,000. These taxes affect only a very small portion of the population. At the same time, the Treasury Department devises the first Form 1040.
1913 The Supreme Court Defines ‘Income’
In Stratton’s Independence v. Howbert, the Supreme Court defines income under the tax law as the “gain derived from capital, from labor, or from both combined” including both the dividends paid to corporate stockholders and the profit that is gained from selling assets.
1918 Top Tax Rate Hits 77 Percent
To raise additional taxes necessary to finance the First World War, Congress increases the top rate of the income tax to 77 percent, an all-time high. Modern federal tax rates vary between 10 and 38 percent.
Initially, by our reading of history, the Federal Tax system was a progressive idea, and in fact the Income Tax was created as an outgrowth of the Progressive Movement of which President Theodore Roosevelt (R) 1901-1909 was Chief Executive. Its all the gaming played in the establishment of the Tax Bill where the monied interests get their benefits facilitated by the lawyers and lobbyists who game the system for their own benefits and the average taxpayer is left holding the bag.
It sounds to us, that a return to the Republican Party of the early 1900’s warrants consideration because as per Wikipedia:
“The Progressive Movement was a movement that began during the presidency of Theodore Roosevelt. It focused on social reforms such as suffrage, working conditions, education, and industrialization. The main aims of the movement were the pursuit of trust busting, the breaking up of very large monopolies and support for labour unions, public health programs, decreased corruption in politics and environmental conservation.”
Its clear the MAGA Movement is far afield from it’s history once again. The Republican Party which won the Civil War and brought an end to slavery, a curtailment of State’s Rights, and later the creation of a Public Service System not based on patronage but rather professionalism is far different than the current adrift Me, Me, Me Administration’s behavior. We will remind our dear readers of our recent article Musk/Trump’s Attack on the Civil Service System and the importance of President Chester A Arthur (R).