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Editorial: State budget/curb barbs; find compromise

Date Published: 05/01/2009

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Editorial: State budget/curb barbs; find compromise

Star Tribune | May 10, 2005

Gov. Tim Pawlenty had his fun last week with the Senate DFL majority's tax plan. With intemperance reminiscent of his predecessor, the quick-tongued Republican governor blasted as "profoundly stupid" the plan to raise income taxes in the next two years on the state's 42,000 top earners. The Senate bill is "a job killer," he said.

To be fair, the DFLers had some barbs coming. They've spent more than three months lambasting Pawlenty's budget plan, while revealing their own hand with less than three weeks remaining in the session's constitutionally allotted time.

But Pawlenty is discovering that name-calling can boomerang. Already, letters to this newspaper are calling "profoundly stupid" Pawlenty's proposals to kick the childless poor out of MinnesotaCare and expand gambling. They are asking whether raising property taxes and continuing skimpy investment in higher education, as Pawlenty's plan does, aren't "job killers."

With only 13 days remaining until deadline, it's time for the cheap shots to give way to governing -- on the part of Pawlenty and his allies who control the House and the DFLers in the Senate. Both parties have advanced budget plans that are nonstarters for the other. Both want to spend at least $1 billion more than existing revenues allow -- and they should, to renew lagging investment in education, at all levels. Neither side should expect a resolution that has it all one way.

This newspaper has endorsed two revenue-raisers for the state's general fund: a $1-per-pack increase in cigarette taxes, and the extension of the sales tax to clothing. Though neither legislative majority has yet embraced those ideas, we renew our motion. Each of those tax increases are "two-fers," bringing secondary benefits along with the revenue they raise. Cigarette taxes help depress smoking rates, especially among teens; a tax on clothing sales would bring more stability to the state's too-volatile revenue stream, and would make Minnesota's tax mix more typical of other states.

A cigarette tax hike is the first choice of Minnesotans who favor a tax increase, according to a Star Tribune Minnesota Poll conducted last week. But in second place, chosen by more than one in four respondents, was the boost in taxes on upper income earners that the Senate majority proposed. Those people may be dismayed by an unfair tax trend that the governor ignores. Since the 1999 and 2000 Legislatures slashed income taxes, the state's top earners have been paying a smaller share of their incomes in state and local taxes than anyone else. The gap is widening. By tax year 2007, those in the top 10 percent of earners are forecast to spend 7.6 percent of their incomes on state and local taxes, compared with 12 percent by those with middle incomes.

The governor and his allies justify the most-favored treatment that high-income earners are getting by claiming they're "job creators," a highly mobile class whose loyalty must be cultivated. They point particularly to the small-business entrepreneurs whose business profits are taxed as personal rather than corporate income. What they are actually pointing to is the need to reform the way Minnesota taxes business income.

It has to be possible for Minnesota's tax code to both encourage entrepreneurship and collect a fair-share payment from those who have gained the most from the opportunities Minnesota affords. State officials studied business tax reform in the late 1990s, but did not bring forward a proposal. This year, the think tank Growth and Justice called for a lower-rate, broad-based tax on business activities that would spare small businesses entirely, and an income-tax boost for those with high personal incomes.

Those ideas deserve careful examination by legislators during the coming interim between sessions. Now, legislators and the governor need to make sure there is an interim -- by setting aside nonstarters, cooling the cheap shots, and seeking middle ground.


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