As we head into the final days of the 90th Legislative Session, all state finance budget bills for the fiscal biennium beginning July 1, 2017 and ending June 30, 2019 have been forwarded to the governor. Regrettably, he has vetoed all of the bills. Negotiations continue in earnest and we continue to be hopeful that compromise agreements can be reached between the governor and the Legislature, thus avoiding a special session and/or an interruption of government services.
During the past several weeks and months, a narrative about state finances has been much talked about in the public square and our local media. At center of this narrative has been the question of “what to do with the budget surplus?”
I would like to report to you information which is most often left out of the discussion in the news as reported about the fiscal facts surrounding our great state’s financial condition and the budget surplus.
A Brief History by the Numbers
The state biennial budgets passed into law for the past several budgets including the proposed FY 18-19 are as follows:
The total increase during these eight (8) years ( including the proposed budget) of approximately $11 billion, or an increase of more than 31 percent.
In addition, we should reflect not just upon spending, but also include total unspent revenue increases. During this same period we have collected additional revenue to fund $300 million in the state’s cash account, added approximately $1.5 billion to the state budget reserve account and have an additional projected surplus of $ 1.65 billion. Placing these additional revenues into the equation adds approximately $3.45 billion, for a total of $14.45 billion of increased revenues and spending, totaling an increase of 40.93 percent over the same period.
Has your household income increased at the same rate as state government?
The Budget Surplus and the Tax Bill
The budget surplus is a projection of excess revenue that will be in the state treasury at the end of the FY 18-19 biennium if current tax laws and rates of collection are not changed or modified. This means that the money is not in the bank but still remains at this time in your pocket and is future revenue from income that you yourself have not yet earned!
There has been no shortage of individuals, organizations and special interest here in St. Paul advocating to continue this unnecessary rate of taxation and to spend this projected revenue/money that you have not yet even earned, further growing the size of our state government.
It has often been said that Minnesotans were asked to step up to the plate and pay more and higher rates of taxes in order to offset revenue losses and decreases attributable to the Great Recession. This request by government was in fact not a voluntary request, but was instead involuntary. Failure to pay these increased taxes voluntarily carries the force of law and coercion resulting in severe consequences.
Arguments are always made that government needs to “invest” or “make investments.” Some legitimately so, but let us be clear, most “investments” are nothing more than wishful spending. Let’s be honest and call it what it is. It prioritizes collectivism and the priorities of the state over that of individuals and families priorities. The projected budget surplus, if left in the hands of taxpayers, will also be spent by those who earned these yet uncollected taxes. Leaving these spending decisions to the private sector rather than to government carries the efficiency of a free market. Consumers will spend this money where they best see fit. This spending or lack of spending will signal more production or less production of certain products as demand may dictate. This same projected surplus will surely be spent and infused into our local economies spurring increased economic activity all around this great state.
Others argue that prudence would dictate that we should not lower or reform our tax and regulatory structure at this time because of the uncertainty of economic conditions that may lie ahead. Although no one can predict the future and this may sound responsible, it certainly is irresponsible to be growing the size of state government at unsustainable rates of growth that outpace the rate of economic growth in the private sector by more than double the current growth rate, especially if there is another recession.
Lastly, if lowering tax rates and reforming policies positively affect discretionary income in the private sector, this private stimulus and the money inevitably changing hands many times within the budget cycle will positively offset so called “lost government revenue” with additional sales taxes, excise taxes and personal income taxes and business taxes.
If we cannot reform the uncompetitive standing of Minnesota’s tax policies compared to other states during a time of surplus, when can we ever have an opportunity to do so?
As hard working Minnesotans are recovering from the misery of the Great Recession, it is time for government to say thank you for your sacrifices during times of hardship and give most if not all, of this excess revenue resulting from over taxation back to the people. The Republican tax bill, does just that.
Rep. Jerry Hertaus
Vice-Chair, Property Tax Committee
Tax Committee Conferee