Where Do Our Taxes Go?

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With so much attention paid to the inaction and deficits of governmental structure, we can forget what government does do — programs and infrastructure that communities need to function well.

According to the national Center on Budget and Policy Priorities, in 2019:

  • Nearly one-quarter of public funds paid for retirement benefits for the elderly population — essentially a long-term savings account for individuals offered via the government’s Social Security program.
  • Another one-quarter of public funds pay for health insurance programs such as Medicare, which supports the health needs of 61 people over the age of 65 or living with disabilities.
  • Nearly 20 percent goes to the U.S. Defense Department.
  • About 8 percent assists low- and moderate-income households with tax credits, supports unemployment insurance, subsidizes food and housing assistance for the poor, helps pay for home energy bills and childcare, and offers programs such as aid on behalf of abused or neglected children.
  • The remaining funds provide benefits to veterans, ensure safe food and drugs, protecs the environment, invest in education and scientific research, and support infrastructure such as roads, bridges, and airports.

At the state level, in a normal (non-pandemic) year, 70 percent of the state budget goes toward public schools, health, and human services. There was a surplus in Minnesota coming into 2020, after wiping out budget deficits from the last recession and after investing in all-day kindergarten and expansion of preschool programs.

Minnesota government spending has increased over the past decade, partly due to inflation and an additional 400,000 residents, which is why taxation and other revenue generation has increased 21 percent. According to a TwinCities.com story in 2019:

In an average year state government was raising and spending about $8,000 per person every two years — up $500 in spending and $900 in revenue from ten years earlier. Some of that is supported by federal funding.

Health spending, for example, is focused on preventing infectious and chronic disease, promoting clean water and air, and ensuring safe food, quality healthcare, and equitable access to healthy living.

Human services focuses on helping people achieve greater independence — partly by stabilizing security, healthcare, food access, child support, mental health, childcare.

Minnesota legislators have an October 1, 2020, deadline to find $100 million to cut out of the next two-year budget. The current $48 billion spent over two years statewide has $15 billion toward health and human services. According to Rep. Tina Liebling of Rochester, who is chair of the House Health and Human Services Finance subcommittee, the Blue Ribbon Committee working on this report “is still treating the deadline seriously and is on track to produce the report on time.  However, the BRC work was disrupted by COVID so the utility of the report will be less than hoped.”

Priority Debates

Disagreements in the Legislature tend to be about how to raise and spend public funds, such as:

  • Should there be a tax to keep health insurance affordable to low- and middle-income residents?
  • Can gas taxes be raised to pay for transportation needs, including needed repairs to statewide roads and bridges?
  • Who pays for special-education costs and gaps in revenue raised for local schools?
  • How can the tax code be modified to reduce tax burdens, to who, while also raising needed revenue, from who?
  • How can we fund needed programs to address the opioid epidemic, protect vulnerable people, and improve school safety?

County Spending

At a county level, some of the services provided by government spending include parks, support programs, public safety, elections, recycling, libraries, emergency call centers, veteran benefits, governmental licenses, bridges and county roads, public transportation, food safety, workforce training, and response to emergencies.

In Hennepin County, seven commissioners on the board are largely responsible for overseeing a $2.5 billion budget; nearly half of that raised from property taxes. Expenses are for public safety (county attorney, courts, sheriff, corrections), health (emergency care, medical examiner, sexual assault resources), libraries, environment and energy public works, and staffing of more than 8,000 people. The Housing and Redevelopment Authority unit in the county has a budget of $22 million.

In contrast, St. Louis County commissioners, which includes the Duluth area, oversee the spending of $770 million in revenue, half of which comes from sales tax.

In Olmstead County, which includes Rochester, the county revenue is $263K, with 42 percent coming from property taxes. It invested $2 million in 2020 for improved electoral technology.

The Fiscal Disparities Act of 1971 establishes dispersal of property tax revenue among seven neighboring counties in the Twin Cities metro area, since some areas have more people and businesses and thus more tax revenue. An analysis done in 2015 found that 101 communities received more than they paid in. The top recipients were St. Paul, Brooklyn Park, Coon Rapids, Brooklyn Center, and Columbia Heights. Of 78 communities that paid more than they received, the top contributors were Minneapolis, Bloomington, Eden Prairie, Minnetonka, and Edina.

Related Resources

CBPP report: Where do our federal tax dollars go?

MN Government: Operating budget 2020

Hennepin County: Budget 2020

Ramsey County: Budget 2020

St. Louis County: Budget 2020

Olmsted County: Budget 2020

(from Minnesota Department of Revenue)
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