State Budget: Round One
Gov. Dayton’s tax increases are the biggest proposed in Minnesota history
St. Paul—Governor Dayton last week proposed the biggest tax increase in Minnesota’s history, mounting to $3.8 billion in new taxes to pay for a $2.7 billion increase in government spending. This grandiose tax-and-spend scheme makes it difficult for anyone to support, namely because it lacks the prudent and common sense fiscal management Minnesotans came to expect over the last biennium.
You see, every odd year the governor is obligated to provide the Legislature with a starting point for budget work. And, what a starting point this is!
Governor Dayton’s plan is a complete reversal of the state’s current path to success. If you can remember back to 2011, the state’s fiscal house was not in order. We faced a historic $6.2 billion deficit and government spending that was out of control, growing at a projected 180 percent over the decade.
At that time, Republicans in charge of the Legislature made a commitment to not raise taxes, to grow jobs in the private economy, to stop the growth in government spending, and to make government more accountable to taxpayers.
What were the results? We turned a historic deficit into consecutive surpluses, amounting to $2.5 million for 2012-2013. High unemployment in 2011 dropped to its current rate of 5.7 percent, far below the national average. Not to mention, nearly 61,000 new businesses were registered and 55,000 new jobs were created in Minnesota last year alone!
Now, Governor Dayton proposes to increase government spending far beyond the growth of the economy. To pay for it, he proposes expanding the sales tax rate to include nearly every good and service imaginable, tax business-to-business transactions, tax cigarettes by an additional $1 per pack, tax Minnesota’s snowbirds, and increase the taxes on households that bring in more than $250,000.
The governor frequently says that the “rich” need to “pay their fair share.” However, the middle class and small businesses will pay the lion’s share of Governor Dayton’s tax-and-spend bonanza. Only about a third of the new taxes would come directly from an income tax increase on the “Top 2%”.
The middle class will be hit hardest by the taxes on everyday goods and services like haircuts, auto repairs, over-the-counter drugs, just to mention a few. At the same time, businesses will be forced to raise prices on their goods and services because of an increase in the taxes they must pay. This amounts to just another hit to the middle class.
While I agree that the tax code needs to be reformed, I do not agree that “reform” means jacking up the tax rates by $3.7 billion for the biennium. Reform is good, but nothing in the governor’s plan exists other than across-the-board increases, band-aid spending increases, and the same “gimmickry” he wants to get rid of. For instance, the governor proposes pushing back the school shift until 2017, a move to “kick the can down the road.” This comes after Republican surpluses have slowly but surely been paying it down over the last two years—all without raising taxes!
From what I can calculate, any miniscule positives that businesses and homeowners might enjoy from Governor Dayton’s plan will be canceled out by other parts of it.
The Legislature will now ruminate on Governor Dayton’s starting point until the official February forecast comes out, at which time we will start plugging in the real numbers we have to work with for the next biennium. While I disagree with the governor’s approach to the budget, I look forward to consensus collaboration working across the aisle on ways to make it a manageable plan for all Minnesotans.
As always I welcome your comments and thoughts. Please contact me with your thoughts on how to balance the budget. I can be reached at 651-296-8872 or by email rep.mike.beard@house.mn.