Category: Economy

by Dave Mindeman

Sausage may make a fine meal, but don't watch it being made.

And so it is with budget legislation. The DFL Legislature has agreed to a tax bill and it is a good one - but getting there was an adventure.

What's In

Governor Dayton campaigned on taxing the wealthy and to no one's surprise, this is the foundation of the new revenue package. We now have the 4th highest state income tax rate in the nation, but we have always been near the top. A major jump in the cigarette tax is also part of the package. Although this has regressive elements to it, tobacco has always added health risks to our budget and most Minnesotans lean favorably to this type of taxation. The Senate provision that added some business service taxes to the sales tax also ended up in the final product. These deal with warehousing and software services which don't have much direct impact on consumers (although I am sure the GOP will be more than willing to point out that any tax on business ends up as higher costs to the consumer -- we get it).

It is a fair package and makes some good investments.

What's Out

The House provision for a surcharge on higher incomes to pay down the school shift is out. And, to be honest, I think that is good. I tend to agree with an op-ed by Minnetonka Superintendent Dennis Peterson (examined in Minnpost)....

The payment delay may have forced some districts to dip into reserves or engage in short-term borrowing. But to Peterson and many others, it was far less painful for school districts than comparable reductions in state aid.

Since the borrowing has already been done and since the school shift is going to be paid back within the next cycle, it seems unnecessary to add the surcharge on top of the new tax rate. If the school districts had been clamoring for a quicker return, it might have been a different story, but they are happier with the new education investments than they would be with an early shift repayment schedule.

The proposal on the alcohol excise tax is also removed. This had its share of controversy and the hospitality industry was pushing back. The concept was still sound and alcohol consumption is certainly discretionary, but given the choice of alcohol or tobacco, the cigarette tax is preferable.

Bottom line, for all of it, is that the needed revenue is available with a minimum amount of intrusion on the majority of Minnesota taxpayers.

What It Pays For

The big investment is in education - a promise the DFL made throughout the campaign.....and they delivered. In both K-12 and higher ed, education comes out the big winner.

But there is also $400 million in property tax relief - the details are still out there, but bigger rebates are part of the plan. And the city and county governments get exemptions on sales tax which will help enormously with their budgets.

Needless to say, the deficit is eliminated....but the bigger theme here is that there are no gimmicks; thus these changes will work to keep budget deficits to a minimum going forward. Not a full structural fix, but closer.

Other Items

The Mayo Clinic proposal is in the package. I'm not sure the details are complete but it does seem to be a done deal. There were some arguments over the total package and who is in control. We will see the end product soon enough. Other business incentives are also included - which should have some direct impact on jobs. Another promise kept.

And the Rest....

Now that the tax package is agreed to, the other omnibus bills can get finalized. It looks like health and human services will get a $50 million cut instead of $150 million. A bit better. We also have a tricky little back up plan for stadium funding. Looks like existing tobacco inventory will be retroactively taxed and the money used to fund the stadium "rainy day" fund. Ongoing funding will come from one of those "mysterious" closed corporate loopholes. (It would seem that corporate taxation is about as stable as the proverbial finger in the dyke - close one loophole and another opens up.)
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So now the race is on to get everything done before Monday night. The major conflicts are done, but time won't be kind to the smaller arguments.

It has been an interesting session. Let the spin begin.

Category: Economy

by Dave Mindeman

When the Labor department releases its monthly data on the first Friday of each month, there is always a back and forth spin about the data.

Currently if the data is good, the spin on the right looks for the negative aspects and sometimes they even say that the data was manipulated.

Well, let's talk about Wisconsin and Governor Scott Walker. His entire case for being governor centers on improving Wisconsin's economy. He promised to deliver 250,000 jobs during his first term. And he openly mocked Minnesota's budget emphasis on using taxes to expand economic growth. Walker is sure that all those Minnesota businesses are looking to the east for tax salvation.

Well, it's getting harder for Walker to make some traction on the economic front.

He is trying his best spin...he released figures that indicated progress during the first two years of his tenure; Wisconsin has added 32,000 jobs in 2012 and 62,000 during his first 2 years as governor.

That's great if you think that achieving 25% of your goal when 50% of your time is complete is a good thing.

But the report had more. Wisconsin unemployment sits at 7.1% (compared to Minnesota at 5.3%). And, the state lost 22,600 jobs during April....which, at least by my math, would wipe out over a third of all the gains Gov. Walker is touting as his economic jobs creation accomplishment.

But let's talk a little more abstractly about economics for Minnesota and Wisconsin.

Minnesota has now legalized same-sex marriage. The legislature in Wisconsin has been under GOP control and the state passed a Constitutional amendment prohibiting same sex marriage in 2006. (now, 2006 seems like a political lifetime ago).

And the political leaders in Wisconsin are acknowledging that they may have a future problem....

In the seven years since then, Wisconsin Republicans have generally tried to avoid the topic, although Gov. Scott Walker and others have acknowledged the generational shift on the issue — and even suggested they may eventually surrender to it.

While Wisconsin has been talking about attracting businesses to its borders -- one could argue that Minnesota could be attractive to LGBT couples in our neighboring states. We don't even know what kind of economic activity that could be realized by that. We may get some hints by August 1st.

Minnesota and Wisconsin have a lot in common....and at least in the past, their political paths have been similar. Recent events have shown a divergence in both social and economic ways.

Where that takes these states in the future will be worth watching.

Category: Economy

by Alan Anderson

A recent writer to a Minnesota paper claims the part-time Legislature "seems it deserves full-time compensation." I disagree. Let's pay legislators like other "part-time" workers in Minnesota.

Joe Mauer works part time. He works from March through October. His work day is about two to three hours a day. He makes $23 million a year. That's about 240 days and about 720+ hours a year. Figure it out. He makes about $32,000 per hour.

Jared Allen works part time. He works from August through December. He plays in 16-20 games during that time, and works perhaps 3 hours per day. Of the one hour of game time, he works perhaps 30 minutes. So, he works about 10 hours of serious time a year. Certainly he practices and works out, but his money time is limited. Let's see, 10 hours for $14.2 million is about $1.4 million an hour.

Those money hungry legislators want to increase salaries from $31,100 to about $42,000. They are eligible for a daily stipend and can earn a living allowance if they live outside the metro area. That could amount to perhaps $50-60,000 a year. Big bucks.

Mauer and Allen make their money catching and hitting a ball or catching and hitting an offensive lineman. Legislators make their money deciding on the economic well being, education, and basic operation of a $38 billion dollar budget serving five million people.

So, let's pay legislators like other part-time workers in Minnesota. Or maybe not. At $41,000, perhaps they are a real bargain!