Gov. Mark Dayton presented his budget today. Last time Dayton presented his budget (2011), the Republican-controlled legislature were completely unwilling to negotiate and they eventually caused the 2011 government shut down.
But now as a result of a number of factors, including the government shutdown, the DFL controls both houses of the legislature.
“If the investments in my budget proposal are made, they will yield returns in new jobs, private investments, vibrant communities and additional state and local tax revenues; and they will help keep our economy moving forward,” said Dayton. “They represent my best judgment about what Minnesota needs to grow our economy, expand our middle class, improve our quality of life and take care of those most in need.”
Senate Majority Leader Tom Bakk called Dayton’s budget “bold.” House Majority Leader Paul Thissen says this budget “takes Minnesota forward.”
The budget not only pays back our schools, but there will be investments in education instead of deep cuts.
He wants to lower property taxes for Minnesotans and tax the richest 1% of Minnesotans at the same level the rest of us pay. In other words, a tax increase for the 1% and property taxes may go down for the first time in more than a decade.
Dayton starts talking at the 16:42 mark
“Governor Dayton is right to push for long-term structural tax reform that makes tax rates fair and asks the richest 2% and corporate tax avoiders to pay their share and get our economy moving again,” said Dan McGrath of Take Action Minnesota. “The Governor’s plan will create a more robust economy by ending some of the worst abuses of our current tax system.”
Conservatives will kvetch, wail and gnash their teeth over this. They will shriek that our state’s magical job creators won’t magically create jobs because their taxes went up.
They will continue to lie about the $1.1 billion deficit they left behind. They will continue to lie and claim that they balanced the budget with just spending cuts.
Republicans solution to the problem they caused is always austerity — more spending cuts that hurt the people least able to handle more cuts.
But cuts hurt the economy more than raising taxes on the richest Minnesotans.
“Cutting state government spending would trigger three times greater job loss and decline in economic output than raising income tax rates on high income ($200,000/$250,000) an equivalent amount,” said Wayne Cox at Minnesotan Citizens for Tax Justice. His analysis was based August 2011 analysis by the CBO (PDF here).
Also according to Cox, state budget guru Tom Stinson has argued for years that increasing tax rates at the top would be better for Minnesota’s jobs and economic growth than cutting state spending.
Instead of listening to Republicans and their Underpants Gnomes Economic Theory, let’s consider actual facts. Let’s also listen to the people who know the most about our economy.
For example, let’s listen to Paul Anton. He served on Minnesota’s Council of Economic Advisors for 26 years. He wrote an op-ed on May 20, 2011 to no avail as Underpants Gnomes Economic Theory ruled the day.
I understand that Republicans firmly believe that if Minnesota raises its tax rates too high, companies and some high-income individuals will leave the state, thereby affecting long-term state growth. But I am not aware of any careful studies that support that contention, or indicate what would constitute “too high.” Given the relatively strong economic growth (compared with other states) that Minnesota experienced during the 1990s (when its tax rates were somewhat higher than today) I doubt there would be great risk in passing a modest tax increase today. But I would be interested in seeing more evidence before setting policies for the long term.
OK, based on the evidence, what do I think should be done? Two things:
First, pass the governor’s proposed “half tax increase” as a temporary, two-year surtax that sunsets after the next biennium. It will not slow the economy more than would the equivalent spending cuts.
Second, vote additional resources, maybe between $10 million and $15 million, to fund the production of additional evidence that could be used to set sustainable longer-term economic policies.