by Dave Mindeman

Anybody who thought that having a Democratic majority in both the House and Senate in Minnesota, would make the budget process a cakewalk.... didn't understand the issues involved.

It is one thing to have a party like the GOP just say NO to everything....that's easy, but it is a different story when you actually have real ideas to bring to the table.

The Governor had an outstanding comprehensive reform plan that he introduced early on. It met with a lot of resistance...which was expected. But he backed off quickly....much too soon in my opinion. I wish he would have fought for it or at least moved on portions of the legislation that had a clear path.

He didn't.

The House and Senate have been left to either accept the new, scaled back Governor's version or move ahead with their own ideas. They have been doing the latter....which I think is fine. It looks like the Party is in disagreement, but this is how it is supposed to look when you are working toward coalescing competing ideas.

Republicans should really try that sometime. This ousting the non- believers isn't working so great.

But let's get back to the budget.

I have some doubts about the House side's argument about the income tax surcharge on top of the added tiered income rate. The surcharge is OK but it looks more like just another gimmick and not a permanent structural solution. And believe me, a lot of us are tired of the gimmickry.

Granted this "gimmick" is meant to fix another "gimmick" -- namely the school shift -- but the campaign rhetoric during the next election cycle, that is sure to follow the increased taxes, is probably not worth it. The school shift is on track to be paid and if we get the promised increases in permanent funding that seem to be evolving, the delay will be tolerable. Most of the school districts seem to be in favor of that as well.

The Health and Human Services budget target (reductions) in the House is troubling but I assume it is not written in stone. At least they are keeping an eye on our most vulnerable citizens (a nice contrast to Pawlenty's unallotment of General Assistance Medical Care).

But let's talk about the Senate proposals. Frankly, I like the approach they are taking, although I would like to see some tweaking.

The Senate Tax Committee has come back to sales tax reform. They have left out the more controversial aspect - the Business to Business Service task - and brought in other services.

I do wish they were not discussing a clothing tax. The Dayton proposal on clothing above $100 might have worked but a full tax on clothing is something Minnesota has been able to avoid over the years and it would be nice to continue that. I would imagine that the clothing tax expansion is the main reason for the overall rate reduction proposal to 6.0% -- but maybe if we keep the other parts of the proposal and pull out clothing, we can still reduce it but by a lesser amount.

Broadening the sales tax to services is really very important. The trend line for the future is all about a service economy and if we do not get our tax structure involved in that, the structural problems will never be fixed.

I find it a little strange that the Governor's office and the House have quickly dismissed the Senate proposal. I don't know if that means they are against the package as a whole or just some of the parts, but I think it at least warrants some negotiation. After all, none of the 3 competing proposals fix everything.

It seems to me that we need a hybrid that takes the best parts of all of them....and if we did, I believe there is a chance for solid reform.

by Dave Mindeman

States that are controlled by Republicans, meaning control of both legislative houses and the governor's mansion, are falling all over themselves to move extreme legislation. North Dakota is going to turn back abortion rights on shear volume of bills. Virginia thinks trans-vaginal ultrasounds are a good idea. Virginia passed harsher voter restrictions. Arkansas did the same over a Democratic governor's veto. Kansas and Alabama have moved on more restrictions for abortions. Arkansas, South Dakota, Tennessee, and Kentucky have gone against the grain and REDUCED restrictions on guns.

Legislatures with Republican control have moved ideological legislation without blinking....without looking for bipartisan support.

Some Democratic legislatures have used the national mood to make some cautious progress on guns. New York, Colorado, and Connecticut rode a wave of public sentiment and got something done on at least that issue. But nationally, it has been a disappointment.

Control of the legislative reins allows for results -- whether you like the direction or not; something happens.

Then there is Minnesota. Both Houses are in Democratic hands. Governor Dayton is a Democrat. There was a lot of speculation that some bold initiatives were in the offing....at least that is what we thought.

Reality? Not so much.

A bold tax reform plan was in the works at the beginning. But that has been scaled back to near Band-Aid form. Education was going to be the big change. Yet, the high minded rhetoric has also been scaled back to the point of a real fear of "under-reach". Transit revenue is still on the table...but that too, is getting the knife. Marriage equality could still happen but the knees are starting to wobble. Gun legislation is becoming a shell of what it needs to be. And yes, health and human services is getting its revenue chopped.

What is going on?

Democrats are trying to listen to the business community about their "concerns". Seriously? You think you are ever going to please business without an (R) next to your name? They have fought every revenue proposal and still advocate for education, infrastructure, and transit. And in the end, come 2014 guess who will be funding those attack ads on the Democrats? Your business "friends".

Minnesota Democrats still seem to believe that bipartisanship with an obstructionist party is somehow going to be rewarding....that the electorate will give them an "A" for effort. Do you still seriously believe that? While Democrats hedge and waver and look for compromise, Republicans just criticize and can barely contain their glee.

Democrats! C'mon. Find some will and act.

by Dave Mindeman

The business community is doing a full court press on business service sales taxes. They don't like it. And again, without any proof or fact based arguments, they say it will "kill jobs".

You know, really, in business and GOP world, everything kills jobs. It is a wonder we have any left.

But I digress.

I want to point out the Pioneer Press editorial which, again without any proof or documentation, espouses the business view of business to business service taxes.

The editorial points this out:

Business services were the second-largest source of employment growth in Minnesota over the last decade.

And I am sure that is true. We are now in a service dominated economy...which is the very reason that Dayton's proposals must be examined carefully. They are bringing our sales tax laws to an updated and more current method of taxation.

The editorial quotes the Minnesota Business Partnership's Charlie Weaver with the usual argument:

"We're hopeful our message is getting through" -- that the business-to-business sales tax will cost Minnesota jobs and put Minnesota companies at a disadvantage when they compete across the country and across the world, Weaver said.

Question remains, how do they really know?

It is interesting to note that an article in today's Daily Caller seems to call on Republicans to embrace the business service sales tax. (It should be noted that Gov. John Kasich of Ohio is actually proposing a very similar sales tax expansion to Gov. Daytons).

Quoting the Daily Caller:

The tendency to exempt most services (as opposed to goods) from sales taxes is one of the greatest weaknesses of current state tax codes. Sales taxes are a major source of funding for state governments, providing, on average, about a third of all revenues. But over the years, sales-tax bases have eroded, due to the rise of online commerce, states granting exemptions for basic necessities such as food and clothing, and consumers spending a greater share of their incomes on services and less on goods. In 1935, when Ohio’s sales tax was first designed, sales of goods constituted 56.5 percent of all personal consumption in the U.S., and services only 43.5 percent. Now, two-thirds of all spending is on services and only one-third is on goods.

The author of the piece address Republicans directly:

Republicans now hold complete control of 25 state governments, and several Republican governors have recently proposed major tax reforms. But, thus far, only Kasich and Bobby Jindal of Louisiana have grasped the advantages of service taxation. (Jindal has proposed a tax reform package that includes service taxation, but has not yet released the details.) More Republicans should make service taxation central to their tax reform plans.
(Emphasis mine)

And the articles conclusion is also worth noting:

Pursuing service taxation would allow Republicans to seize the high ground in tax policy debates, to be known as the party committed to improving tax codes by making them fairer, more efficient, and better-suited to the service-based economy of the 21st century.

Seize the high ground? Why if you ask Minnesota Republicans about such things, it is as if you have spoken sacrilege.

It should be noted that the author of this Daily Caller article is Stephen D. Eide, a senior fellow at the Manhattan Institute’s Center for State and Local Leadership.

And, you may ask, what is the Manhattan Institute’s Center for State and Local Leadership?

The Manhattan Institute for Policy Research (renamed in 1981 from the International Center for Economic Policy Studies) is an American conservative, market-oriented think tank established in New York City in 1978 by Antony Fisher and William J. Casey. The organization describes its mission as to "develop and disseminate new ideas that foster greater economic choice and individual responsibility".

Hmmm...conservative, market-oriented, economic choice, and individual responsibility. Sounds like Conservative-Speak to me.

I firmly believe that if Minnesota leads the way in this sales tax expansion reform, that more states (not only Ohio and Louisiana) will be jumping on this bandwagon.

Trade offs should be made. Governor Dayton has given corporations income and property tax breaks that can negate some of the service tax expansion "costs".

But, unless we move forward with this, our sales tax revenues are going to continue to fall furthur behind our revenue needs.

Unless the Pioneer Press and the business community can offer more proof of harm than rhetorical statements, this needs to happen.

Even Conservative think tanks agree.