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State Representative David Dill
100 Rev. Dr. Martin Luther King Jr. Blvd.
651-296-2190
For more information contact: Ted Modrich 651-296-5809
Column/LTE
Not Finding Revenue to Balance the Budget is Unrealistic.
Budget balancing proposals are now on the table from the House, Senate and the Governor. While two of the proposals offer an “all options on the table" approach, one claims that it can balance the budget without finding additional revenue.
Nobel Prize winning economist Joseph Stiglitz and the Office of Management and Budget Director, Peter Orszag, agree that cutting alone doesn’t reflect the reality of our situation. In fact, only enacting cuts during a downturn in the economy would hurt us more than help us facilitate recovery.
Priorities during an economic downturn must be to stabilize the economy, retain critical workforces and enhance job creation. The number of jobs lost under a cut-alone option would likely impact 12,000 education employees, thousands of public safety workers and tens of thousands of healthcare professionals. The cut-alone approach to the looming 2010-11 budget deficit will do little to accomplish these goals.
Listed below is some of the revenue raising options that have been discussed thus far. The list is not all inclusive. Some options have had legislation introduced but none have been adopted.
Revenue Proposal: Potential Income for 2010-11 budget
Eliminate many sales tax exemptions on goods/services 2.6 billion
K-12 Education payment shift (not new money/accounting gimmick) $1.8 billion
Return income tax rates to 1998 levels $7 billion
Enact 10 percent income tax surcharge $5 billion
Eliminate sales tax exemption on clothing $2 million
Create new tax bracket:
9.7 percent for incomes above $250,000 $643 million
9 percent for incomes above $400,000 $309 million
Return top income tax rates to 1998 levels $329 million
Eliminate business tax preferences $91 million
Raise business property tax $83 million
Regarding the new income bracket, a recent study from the Department of Revenue (tax incidence study) has shown that our tax system is regressive. Regressive vs. progressive means based on ability to pay. Sales and property taxes are considered regressive because the payment of the tax has nothing to do with ability to pay. Progressive taxation, such as income taxes are based on the ability to pay. A tax surcharge would likely be a temporary measure and could be revoked once the revenue isn’t needed. The state enacted this kind of revenue enhancement for the deficits of the early 1980s. Returning income taxes to 1998 levels by repealing the 1999 and 2000 income tax cuts would raise revenue and affect high-income earners the most.
Some of these proposals are progressive; some are regressive. Enacting all of them would more than cover our deficit, but that (like only using cuts) is unrealistic. A selection of these proposals or other ideas combined with cuts and delayed payments would assist with balancing the budget and set us on a course towards recovery.
I am suggesting that we work together in a spirit of shared ideas and sacrifice to balance the budget, stabilize the economy, create jobs and work towards a more prosperous state. Please, feel free to call, e-mail or visit me at the Capitol. Your thoughts are welcomed. You may contact me I at 1-800-339-0466, rep.david.dill@house.mn, or my home in Crane Lake at 218-993-2252.
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