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Our View: Governor must define tax reform

Date Published: 05/01/2009

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Our View: Governor must define tax reform
What exactly does Gov. Tim Pawlenty want when he calls for reforming the state's tax laws? Does he truly want a tax structure that hones the state for global competition? Or is his focus really no deeper than that tired "no new taxes" mantra?

Those are fair questions to which Minnesotans deserve clear answers, especially after Pawlenty's cool response to some key recommendations last week from a blue-ribbon committee he formed to address this issue.

The Governor's 21st Century Tax Reform Commission's "Minnesota's Millennium" report, which was a year in the making at the hands of a business-heavy 15-member panel, offered several ideas on track with Pawlenty's mandate last April "of making long-term improvements in the revenue system that reflect changes in business practices, demographics, and the economy that have occurred in Minnesota and other states."

Among the eye-catchers were:

Repealing the state's corporate income tax, often seen as the No. 1 deterrent to business and job growth in <?XML:NAMESPACE PREFIX = ST1 />Minnesota.

Exempting 20 percent of active "pass-through" business income from taxation. (Some critics see this as a tax break for the wealthy.)

Simplifying the state property tax system.

Requiring a "benefits received" report of state business taxation every other year.

And extending the sales tax to more consumer products and services along with raising taxes on cigarettes to pay for all the tax reform for businesses.

According to The Associated Press, commission Chairman Mike Vekich said in releasing the report that all the changes would require generating about $800 million annually more via an expanded sales tax and about $300 million from an increased cigarette tax.

While Pawlenty embraced many of the tax-reduction strategies offered for business, he balked at expanding the sales tax. Said Pawlenty spokesman Alex Carey, the governor "does not like the idea of raising sales taxes on consumers and is not embracing that portion of the commission's proposal."

To which Vekich adroitly noted in a St. Paul Pioneer Press report: "You've got to pay for reform."

And that's exactly why it's important for Pawlenty, now in his seventh year in office, to offer a clear definition of tax reform in Minnesota.

As much as the governor wants to trumpet changing the state's tax structure to improve its business climate, he remains reluctant to acknowledge that doing so means one of two fundamental choices: Other segments pay more or state government substantially reduce its services.

Really, though, by immediately rejecting his own commission's suggestion of the former, he leaves only the latter option. Yet in six years, he has yet to propose any fiscal plan that comes even close to cutting the $1 billion a year this report requires.

So what is it governor? Are you serious about fair tax reform statewide?

If so, please define it. If not, then this becomes just another blue-ribbon report bound to collect dust on some state office's shelf.

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