FEBRUARY FORECAST REVEALS FOURTH CONSECUTIVE STATE SURPLUS
PEPPIN: “Now is not the time to dramatically increase government spending and force tax increases.”
ST. PAUL—State Representative Joyce Peppin, R-Rogers, today responded to the positive economic news revealed in the February budget forecast. For the fourth budget cycle in a row, Minnesota has a surplus, this one amounting to $295 million. In addition, a projected $4.4 billion deficit for 2014-15 has been significantly reduced to $627 million, down from the $1.1 billion deficit which faced lawmakers when they came into session in early January.
“The February forecast is fairly convincing proof that the fiscally conservative policies we implemented over the last two years are working,” Peppin said. “While facing a historic $6 billion budget deficit, we managed to restrain government spending and promote the private economy—all without raising taxes. We were ridiculed by many for those actions. Now, the economy is climbing back to recovery, unemployment is on the decline, businesses are slowly growing and tens of thousands of jobs have been created in the private sector.”
Under state law, the majority of the surplus will be used to further reduce the school funding shift, reducing the number to $800 million from a high of over $2 billion in 2011. It remains to be seen if the strong economic news and additional surplus will cause Governor Dayton to modify or scale back his proposed $3.7 billion tax increase and a $2.5 billion increase in government spending. “I encourage the Governor to analyze the recent economic news with an eye toward eliminating some or all of the many tax increases contained in his original budget,” Peppin suggested. “I do not think it is wise policy to implement a $3.7 billion tax increase to fix a $627 million problem that, if left alone, would remedy itself over time.”
For instance, in Hennepin County, the sales tax would expand to nearly every good and service (examples include accounting, veterinary bills, tax preparation, auto repairs, haircuts, legal work and countless others) at 6.15 percent, which includes a .25 percent hike in the metro transit tax. Additionally, individuals making more than $150,000, or couples more than $250,000, would see a substantial income tax increase that would make Minnesota’s income tax rates among the highest in the country. The governor also proposes taxing “business-to-business” transactions, such as accounting and legal services which even his fellow DFLers have largely resisted because they know these increased costs would simply be passed on to consumers.
As a member of the House Tax committee, Rep. Peppin heard five hours of public testimony Wednesday night about the effect Gov. Dayton’s tax increases will have on small businesses. “Small business owners and entrepreneurs who have weathered the worst economic conditions in decades expressed concern that the governor’s tax plan will unnecessarily burden their companies after they’ve worked hard to survive over the past several years,” Peppin said.
Peppin concluded: “In light of this positive economic news, Governor Dayton’s tax and spending increases aren’t wise fiscal policy, and moreover, they aren’t fair to the people of Minnesota. With the economy slowly recovering, now is not the time to dramatically increase government spending and force tax increases through the legislature. I urge the Governor and his DFL legislative allies to put together a budget that requires the state to live within its means, just like working families in the northwest suburbs do every day. We’ve proven it works.”