Category: Taxes

by Dave Mindeman

What would happen if the Chamber of Commerce was running this state? That's a legitimate question, because they obviously think that state government operates for them.

I say that because Governor Dayton got into a frank discussion at a Minnesota Chamber meeting today and the back and forth was illuminating.

Dayton took a lot of criticism from the Chamber and other business groups regarding his sales tax expansion to business services. The proposal would have solidified state budgeting for the foreseeable future and have allowed more investment in education and infrastructure. Spending which the Chamber has supported in the past.

Yet, when they are asked to contribute in a meaningful way to pay for that investment, they cry foul.

So Dayton dropped the sales tax proposal with the caveat that his increased income tax on higher income earners would go forward.

But they object to that as well. They continue to promote the addage that this tax will affect small business...and yes, here we go, the "job creators". They continue this argument even though the Department of Revenue has shown that only 6% of small business would be affected. And again, we are only talking about the highest portions of their income. If they are making substantially more than $250,000, why the huge objection to paying some back to a state that has benefitted you greatly?

So, I come back to my original question. What would happen if the Chamber was running the state? Well, it is obvious that spending cuts are their priority and the cuts would have to come from programs for the poor. They want to keep their 6 and 7 figure incomes untouched, while taking subsistence money away from the homeless.....medical premium subsidies from those unable to get health care.....and education support programs for low income districts.

We will revisit the GAMC debacle that Pawlenty foisted upon us during his unallotment days. We would be forced to block health care reform and continue to use Medicaid as corporate health care for low wage workers. We would continue to watch our infrastructure deteriorate and transit progress reversed because there is no money....and then the Chamber would complain that this deterioration will "hurt business".

The Chamber is selfish, arrogant, myopic, and horribly short sighted. They can only think about the next fiscal year and not about Minnesota's future.

Dayton has listened to their concerns. But it is never enough. They want a government that does their bidding.

And I think it is time we tell the Chamber of Commerce..... to shove it.

Category: Taxes

by Dave Mindeman

In politics, bold thinking is never rewarded.

Governor Dayton is going to be dropping a large portion of his original tax plan. I guess getting reelected has taken precedence.

I can't exactly blame him....it is the nature of our political system. We either do nothing about problems until a crisis occurs or we do things in tiny, incremental steps.

The pragmatist in me accepts that, the progressive in me finds all of it deeply disturbing.

I doubt that our structural budget deficit can be fixed by raising taxes on the wealthy alone. There are just too many obsolete tax methods that are going to continue.

We still have a service economy and the ability to raise enough revenue on taxing goods will continue to decline. It is disappointing that the Governor is going to scrap the entire business service tax....some additional taxes on service would certainly have been appropriate.

For instance, I fail to understand the logic that corporations can hire consultants and accounting firms and lawyers for the sole purpose of reducing their tax liability....and yet, if we tax that service it will destroy the economy. Nonsense.

In addition, I am disappointed that so much attention was paid to the business tax, that we failed to articulate how beneficial it would be to lower the overall sales rate of 6.875 to 5.50. That will probably not change now and will allow the GOP complaints about how we are the highest sales tax state in the Midwest to go on ad infinitum. And it is true- we have the highest Midwest sales tax, but any kind of attempt to change that will take a major restructuring as Dayton had proposed and which everybody seems to be rejecting.

I still have some hopes for incremental changes. Here is my pragmatic wish list.

1) Wealthy Income Tax Hike -- You know, I would have rather seen this go away than the buiness service tax. But then business wants none of it anyway. It is likely that this will pass now (with business and higher income residents objections), but it is now the only way to eliminate the deficit and do anything about education. The business community simply abdicates their state citizenship. They want the great education. They want the roads and bridges fixed and maintained. They want transit to be modern and able to transfer commuters and shoppers more efficiently. But the bottom line is they will not pay for it.

2) Transit Tax -- the .25% transit tax has to stay on the table. We simply have to pick up the pace on a full transit mechanism for the Metro. I'm ok with it being a seven county only tax. Outstate will not see the full benefits -- but they will derive ease of access when they visit the Metro. They will still spend significant money in the metropolitan area; so they still pay some of it. But the longer we slow walk our way to a full transit system, the farther behind we will be as modern metro area.

3) Mayo Clinic Proposal -- I realize that there are some questions as to how much the state would be paying overall in this venture. Bonding has a price (as the tobacco bond fiasco has shown us). But the quicker we move on this, the quicker Rochester can begin its development phase and be an engine of growth in a more rural part of the state. Rochester can not only be a "medical destination" but the entire state of Minnesota can be a leader in a growth industry as more and more medical personnel see Minnesota as the place to be.

4) Repeal of DOMA Discrimination -- This is still just the right thing to do, no matter what kind of polls we get on the issue. We need to settle this and move on. A year from now, we will wonder what the big deal was.

5) Education Investment -- The promise of new revenues in education has to continue. Dayton may have to dig deeper in the budget analysis to make this happen, but we need it to work. Unlike a lot of people, I'm OK with the budget shift repayment delay if we can get new permanent revenues. I think most of the school districts feel the same. The scaling back of Dayton's grand proposal will make this a little tougher now - but it is still a needed future investment for the state economy.

Those are my 5 "musts" for this session. The original intent had so much promise and was a true reform that would have put the state on its firmest financial footing ever. But we are not going to go there it would seem.

We will have to settle for the piecemeal approach....

as we always seem to do.

Category: Taxes

by Dave Mindeman

The push back on Dayton's planned business to business taxes has been pretty heated....and sometimes with a little added hyperbole. Not many states have expanded the sales tax into this area -- those that have have not had a lot problems....but there are obviously areas that can be tweaked.

However, I think it is a mistake to scrap the entire idea. These service transactions are a big part of our economy...and yes, sometimes exemptions need to be made for areas that require the same service and the service tax more than once -- as the trucking industry points out. But we make adjustments for things like that. Under current law, items that are purchased for resale by retailers get a sales tax exemption on the original purchase. The same thing can be worked out for b2b transactions.

People who speak for business always amplify potential problems when it comes to taxes. They don't look for options...they only want to shut it down.

Dayton's plan has a lot of moving parts and obviously the legislature will pick it apart and look for wha is most palatable.

But if all we do is water it down until nothing is left, we are back to what Gov. Dayton describes as Plan B - the status quo. And quite frankly, we need to stay away from that. This is a singular opportunity to fix our structural deficit. To modernize what we tax and make a stable revenue stream.

Don't abandon any of these areas until it has been examined for the positive aspects.....as well as the negative.

Stay on track.