Agenda - Council - 01/13/1981 - Laserfiche WebLink

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up with the CPI, state personal income tax revenues will increase slightly faster than the CPI. If income stays behind the rate of increase in the CPI, state revenues will fall even further behind. In other words, when personal income does not keep pace with inflation, state revenues will do worse still. What changes are needed if we are to ensure that an individual's tax liability rises and falls at the same rate as personal income? The remedy differs depending on whether an individual claims the standard deduction or not. If a taxpayer claims the standard deduction, his or her tax liability can be insulated from inffation by: · Allowing him or her to decrease income by the percentage of increase in the CPI; &plying the 10 percent standard .duction and removing the maximum dollar limits; and · Applying the pre-1979 tax brackets. For higher income people who itemize deductions, the remedy is less clear. Some of the itemized deductions. such as medical bills, are increased along with inflation. Others, such as home mortgage payments, are normally not subject to inflationary increases. So for those who itemize deductions, some indexing is built into the calculations that result in taxable income. Because not all of the deductions rise with inflation, some indexing of the tax brackets would be necessary if the goal is to keep growth or reduction in real income and tax liability the same. The Minnesota Project staff has not analyzed whether the CPI is the best benchmark for those who want to insulate the tax structure from the effects of inflation. Other possible benchmarks are the gross state product, the average wage increase, the index of personal consumption, and the gross national product deflator. MINNESOTA Connections 7 1 The 1979 indexing law provided for several one-time changes in the deductions and credits: . In 1978, the standard deduction was $1,000, or 10 percent of a person's adjusted gross income, whichever was less. The 1979 law increased the maximum standard deduction to $2,000 for 1979 and 1980. . The personal credit, worth $40 in 1978, was increased to $55 in 1979 and to $60 in 1980. Starting in 1981 it will be indexed to the CPI. In order to show the impact of indexing alone on tax liability (rather than the effect of the one-time changes outlined above), the calculations of tax liability have assumed that the one-time changes were already in effect in 1978, and that thereafter, the standard deduction and personal credits were indexed fully to the CPI and the tax brackets were indexed to 85 percent of the CPI. t" Reservation Continuedfromp. 1 In addition to Clark, the business capital. The bank was willing to committee turned to another local provide the capital, but only if the resource _ the Dakota County Adult reservation would put the revenues Vocational and Technical Institute, from the store in the bank, something which offers a grocery store which simply wasn't exactly practical, management course. The manager of since the bank is located in the Nett lake grocery took the course, Washington. which included training in a 7-11 Store The Nett lake leaders also were 10. on the A VTI campus. Rosefelt thwarted in their attempt to obtain al slped the reservation leaders funds through the low-income loan complete negotiations for a $90,000 program administered by the Bureau loan from the Small Business of Indian Affairs. The application was Administration and for interim turned down because the reservation financing from a local bank. was behind with payments on a The Nett lake experience is a classic previous loan, which helped finance example of the difficulties faced by the reservation's sawmill. The reason American Indians who try to obtain for the tardy payments was that the government assistance for economic sawmill was idle while being development, even when they are modernized, a change designed to entitled to the assistance. Securing the generate enough revenues to ensure loan from the Small Business loan payments. Administration (SBA), for instance, "What finally made the project go," required the expertise of an outside says Rosefelt, "was the commitment group like the Minnesota Project. of Dayton Hudson and the determina- Because the grocery store sits on land tion of the reservation leaders and owned by the Bureau of Indian Affairs, others to seek out other resources the SBA required that the reservation. when it became obvious that govern- leaders obtain certain guarantees ment aid wasn't going to cover their before the loan could be granted. This needs. The project is an encouraging process took several months. example of how government funds Meanwhile, the SBA advised can be supplemented by private mon- reservation leaders to ask the ey and local resources to accomplish American Indian 8ank for working local economic development." t" Staff changes Mark Dayton, the founder of the Minnesota Project, has resigned as president of the corporation. In the coming weeks, he plans to explore the possibility of running for public office. A former Minnesota commissioner of economic development, Dayton was part of the Minnesota Project's community development staff. In announcing his resignation, Dayton said, "I am excited by what the Minnesota Project has accomplished in its first two years. I have great confidence in the staff of the Minnesota Project, and I know they will continue our tradition of service to the people of Minnesota.' wish to thank them and the many other people who have given us their support." Tom Triplett, who was elected to succeed Dayton as Minnesota Project president, noted, "Mark has provided invaluable leadership in our efforts to create an organization that can make a difference in Minnesota's future. We look forward to continuing the important work which he has helped us begin." Joan Theisen, a member of the Minnesota Project support staff, also resigned in November to assist Dayton.