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Don't Laugh - A Gas Tax Is Needed Right Now

Category: Economy
Posted: 12/14/15 13:00

by Dave Mindeman

In the big scheme of things, nobody thinks about this anymore. But I am going to try this one last time.

We need to raise the gas tax.

Conservatives will laugh. Liberals will say it's impossible. But the argument can be made that there is no better time or a more urgent need.

Last Friday the Dow dropped 300 points. Why? They were worried about the oil glut. Funny how the big money people get crazy when oil prices rise and when they decline. What exactly do they want? But, getting back to the point, there is an oil surplus at the present time. Gas prices have dipped to their lowest point since the 1970's...(and we did it without Michele Bachmann, I might add...) The North Dakota shale field is shutting down because it isn't profitable to produce when this price is so low. The Arab Oil Cartel continues to pump with abandon trying to force competitors out and manipulate the market. ISIS is dumping oil on the black market and Russia's economy teeters because so much of it depends on oil.

So what does this mean? If the past is any indication, it means Americans will be driving more and buying bigger cars. Which will be a bit ironic since we just made a pledge to reduce carbon emissions by a significant quantity in the Paris accords. A glaring problem with all of that is that we will be driving more on infrastructure that is crumbling.

So in the midst of this economic turmoil, there is a window (a temporary one) of opportunity that could bring in revenue to fix infrastructure in Minnesota by raising the gas tax. We could fund that bipartisan agreed upon need for MNDOT funding of its projects.

The Republican House has shown their derision for a gas tax. So much so, that Governor Dayton and the Senate have already decided it is futile.

But what is the Republican solution? Raiding general fund money targeted for other needs and then borrow the rest. Seriously, does that make sense in a year of budget surplus and with gas prices providing a golden opportunity?

A gas tax at the current time would bring in transportation funding and hopefully reduce gas consumption, at least marginally. This window could close at any time. The Middle East is unstable and oil production could be a target in war or the Cartel could shut everything down again. Yes, the US can now supply more of its needs, but once we start shutting down production capacity, it will take some time to ramp it up again.

So we really need to act now. Fund and fix what we can as soon as possible. A 25 cent gas tax increase would still leave gas prices below what they were last year at this time. Think of the road and bridge projects we could fund with that increase.

And yes, like I said, that could turn the other way....so I would suggest that the gas tax would have to be acted upon each and every year. The tax could be adjusted or eliminated in every legislative session. That would add a lot of politics to the situation - which could be detrimental. But it would also give flexibility that is probably needed.

The Republican House version of transportation funding is patchwork nonsense. You shouldn't be taking money away from budget needs and you most certainly should not be borrowing...it is absurd.

Gas taxes have always been the way to fund transportation. They are user fees. And yes, it is a regressive tax but taking money from other needed projects in a budget seems just as regressive to me.

Gas taxes are not going to raise as much revenue in the future. As more and more people move to hybrids and electric cars and more public transportation develops, gas taxes will cease to be a reliable form of transportation funding.

That window is available now. And the need is now.

Let's raise the gas tax now.
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Economy Good But Bleak Outlook For 2016 Session

Category: Economy
Posted: 12/01/15 02:50

by Dave Mindeman

A couple of days ago, the Pioneer Press ran an article about next year's session entitled:

Tax cut consensus is building at the Minnesota Capitol

Not exactly a profile in legislative courage.

After all, tax cuts are easy. Who's going to object? But I wish we could at least be honest about what is involved. After all, tax cuts are the Republican version of spending. Yes, really. When a tax cut occurs, revenue is not generated. So, unless spending is reduced by an equivalent amount, it will have a negative impact on the budget. I think everybody knows that is true, at least intellectually....but when the arguments begin, it kind of gets lost.

Thursday will give us the next budget forecast. And it is expected to be very good. We should be seeing a $1 billion plus surplus. (I guess those devastating Dayton tax increases have not ruined the economy yet.)

But given our history and the tentative nature of an economy that seems to be benefiting the top earners, should we really be doing tax cuts? Especially when you look at the nature of the MN GOP legislative proposals.

Here are the House GOP priorities on tax cuts:

Exempt more business and cabin property value from the state property tax levy, $555 million.

Create a new personal or dependent income tax exemption, $539 million.

Start phasing out state taxes on Social Security income, $237 million.


Republicans want business to get a huge reduction in property taxes. The Senate seems to agree, but to a lesser extent ($51 million). Second homes would also benefit. All told, this is a half billion break for the upper tier taxpayers. I can hear the argument now....business will turn that money around into creating more jobs. We still are waiting for all that job creation and I suspect we will continue to wait.

Creating a new tax exemption is very vague...especially when again, we are talking half a billion in lost revenue. Since poor people pay little income tax to begin with, this will, again, favor those with higher incomes where a tax credit actually gives them a return.

And then there is the phasing out of state taxes on Social Security income. Social Security is only taxed if you have additional income which exceeds a certain threshold. For most retirees, their benefits are not taxed because their other incomes are low....however, again, the wealthy will generally far exceed those thresholds and 85% of their SS benefits will be subject to Minnesota tax.

All told, the House GOP wants to "spend" $1.3 billion of general fund revenue giving these tax breaks. With a total of $2 billion in tax cutting. And interesting number which offsets Dayton's tax increases....although it is "redistributing" it, to, yes you guessed it, the 1%.

The Senate has proposed tax cuts as well, but a more modest $500 million. They propose a very modest $51 million in business property tax cuts, while going to K-12 education tax credits and business credits for hiring veterans as their other priorities.

Dayton has tax cuts too, but all of it for the middle class. The bulk of it would go to education and child care tax credits and enlarging the low income family tax credit.

So tax cuts is all the buzz. But what if we dip into recession again? The first thing that happens in that event is that health and human services gets slashed and the cycle begins again.

Why don't we take a large portion of the surplus and invest it for future needs? Is that such a horrible thought? Can we not think in terms of decades instead of only next year?

When Republicans talk about tax cuts, they are still spending your money. Any tax cut generated is probably not going to go back to you. It is going to, more than likely, a business making hefty profits.

Although Republicans are blatant about business tax cuts, the Senate has its own vices to account for. I find this a little disturbing....

She also expects Senate negotiators to advocate "some economic development incentives," such as investment tax credits, particularly for the medical device industry.

The medical device industry must have some of the best lobbyists in America. I mean really, tax credits for development incentives? Seriously? Is it not good enough that have bought and paid for Congressman Erik Paulsen....but they want to own the legislature as well?

Really, they are talking about tax credits for research and development. Which really is just tossing money to them for free. They have to do research and development....it is their business model. If they don't do it, these companies will fold up. So, why would we want to hand over tax credits for something they are going to have to do anyway? Only your local lobbyist could explain that one.

But one more important thing. We still do not have a transportation bill. The House GOP wants to protect their huge tax cutting proposal, by shifting other tax money into transportation (as well as bonds - more borrowing). They try to make it sound like that redirected money is just lying around waiting for a use, but the truth is, the money they are talking about is being used for general fund purposes and this redirection would require reductions in other departments.

Dayton and the Senate want a gas tax increase. And if you think about it, that makes sense with current gasoline prices. Make it a temporary provision if you must, but generate some real revenue for transportation. Not the phantom money which the House is enamored with using.

But, of course, the GOP says.... gas taxes can't be discussed. The Senate office building can't be used. The miners unemployment has to wait. And logic needs to be thrown out the window.

Yeah...looking forward to another session.
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About That Workforce Participation Rate

Category: Economy
Posted: 11/12/15 20:45

by Dave Mindeman

Labor statistics are always cited in economic discussions. These statistics can be manipulated depending on what kind of point you are trying to make. The national unemployment figure has been steadily trending downward since the great recession and as corrective measures finally took hold. The Obama administration also can point to an unprecedented 67 consecutive months of job growth. That is the longest streak we have ever had since we have kept labor records.

So when Republicans go into their "woe is us" economic arguments, they have to look for some kind of competing statistic....and they have seemed to latch onto "workforce participation".

So let's get some definitions. According to the CPS (Current Population Survey), a worker is only officially unemployed if he or she lacks a job, has actively searched for a job in the last four weeks, and is available to work.

So who would be the people not working who are not counted as unemployed?

The largest population in this group would be retirees. It is not surprising that workforce participation is trending down because the baby boomers are beginning to peak as retirees.

But another trend is that younger people 18-24 are also a growing statistical number that do not work, yet are not counted as unemployed. Why is that? Because they are spending more years in school...higher education. It is hard to see this as a bad sign for the economy...after all, we are in dire need of a higher skilled workforce.

Prior to the economic downtown in 2007, workforce participation was at 62.7% Our economic situation brought that number down to a bottom figure of 58.2% in 2010. The unemployment numbers were also high and our economy was in trouble. But over the next four years, workforce participation has been climbing - in June it was back to 59.3%

For a comparison, our peak figure is 64.7% in April of 2000, still basking in the 1990's economic boom. So, although things have improved, we are still a full 5 percentage points below the high. Not as bad as Republicans would have you think, but still not where we would like to be.

But there is another trend that is affecting that workforce participation that the GOP would rather not publicize too much.

If you do a gender comparison of workforce participation, you would see that participation by men has been on a very slow but steady decline since 1948. That trend shows no signs of abating.

If you look at female participation, you see the opposite. The number is on a steady increase from 1948 until it seems to peak in 1998. After that the women's participation shows about the same kind of decline as men.

(These statistics are taken from testimony by Elisabeth Jacobs, Senior Director for Policy and Academic Programs, Washington Center for Equitable Growth, testifying before the United States Joint Economic Committee on "What Lower Labor Force Participation Rates Tell Us about Work Opportunities and Incentives" - posted in June, 2015.)

Here is a logical explanation of why women have been leaving the workforce in the last decade...

In 1990, the United States had the sixth-highest female labor force participation rate amongst 22 high-income OECD countries. By 2010, its rank had fallen to 17th. Why have other high-income countries continued their climb while the United States has stalled? Research by economists Francine Blau and Lawrence Kahn suggests that the absence of family-friendly policies such as paid parental leave in the United States is responsible for nearly a third of the U.S. decline relative to other OECD economies. As other developed countries have enacted and expanded family-friendly policies, the United States remains the lone developed nation with no paid parental leave.

Do you think a Republican official is going to mention this explanation when talking about workforce participation? I seriously doubt it.

But the absence of family and parental leave coupled with gender pay inequities do not seem like the incentive women need to come back to the labor force.

So when you hear politicians talk about the undercurrent of pain in the economy not reflected by the official unemployment rate, maybe they need to examine some of the other labor policies that have not been enacted which might improve that situation.

As often happens, it is what they don't say that matters.
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