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Plan would raise top-income tax, cut corporate rate

Date Published: 05/01/2009

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Plan would raise top-income tax, cut corporate rate

Star Tribune | February 24, 2005
By Dane Smith

A hybrid of an idea for sweeping tax revision in Minnesota, premised on "exploding cherished beliefs" of liberals and conservatives, got a respectful hearing in the House Taxes Committee on Wednesday and a modicum of bipartisan praise.

The two basic solutions offered by Growth & Justice, a new St. Paul-based think tank founded by former Star Tribune Publisher Joel Kramer, are higher state income taxes for those near the top of the income scale, and a corresponding reduction in business taxes.

Republicans and conservatives get it wrong when they argue that income taxes hamper business and properity, Kramer said.  He said nine of the 10 states with the highest per capita income have an income tax, while most of the 10 poorest states do not have an income tax.  A variety of factors, including recent federal and state income tax cuts are widening the gap between the wealthy and everyone else, he said.  

Not progressive?

At the same time, Democrats and liberals get it wrong when they think that higher taxes on businesses are "progressive," or less burdensome on people of modest means than on the rich.  Tax experts generally agree that business taxes, such as those on corporate income, largely are passed on to consumers in the form of higher prices, or to worker in the form of lower pay, and are thus regressive, Kramer said.

A "swap" between high-bracket income tax increases and lower business taxes would result in economic growth and more social justice, Kramer said.

Revenue Commissioner Dan Salomone, an appointee of a governor who has taken a no-new-taxes pledge, called the Growth & Justice presentation an "honest, piece of work."

Some Republicans on the House Tax Committee expressed sympathy for Kramer's proposal to provide lower overall business tax rates in return for broadening the tax base and eliminating the current patchwork system of special tax breaks for some businesses and regions.  Breaks include exemptions such as those for ethanol production or for special low-tax job zones, a policy conservatives often deride as "picking winners and losers."

Republicans typically try to reduce business taxes but they tend to adamantly oppose any income tax increases; DFLers take the opposite tack.

DFLers on the committee generally were even warmer to Kramer's concept, perhaps because one of his three alternative strategies was not "revenue-neutral" and would raise about $1 billion for the state.  Rep. Connie Bernardy, DFL-Fridley, said that the proposal sparked a useful and bipartisan exchange and that "to have this kind of conversation is real progress."

Nonpartisan, but

Kramer acknowledged that his plan is "very unlikely to go anywhere this year" in the Legislature.  He described it as "a strategy proposal to get people to think differently."  Although Kramer's group in nonpartisan and he was one of the state's high-profile corporate executives, his r sum reveals a DFL affinity.  In 2002, shortly after retiring as publisher of the Star Tribune, he was an unsuccessful candidate for the DFL endorsement for lieutenant governor.

The board of directors of Growth & Justice includes about a dozen business owner and executives, but it also contains a large contingent of current or former DFL elected officials and activists, as well as former top aides to the late Sen. Paul Wellstone, a liberal champion.


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