On the 1st and 15th of every month I write a column for Minnesota Monitor.
As I wrote in my previous column in this space, I think that the DFL leadership in the Senate and, to a lesser degree, the House has made a strategical error in the formulation of their budget plans. Ceding the language of “America’s highest income tax bracket” is an almost inexcusable mistake and the accompanying sales tax increases don’t help the cause. That being said, the Governor has led us down a path that leaves us at a crucial juncture with only two options: raise revenue or dismantle Minnesota’s legendary quality of life.
Slowly but surely I think Minnesotans are beginning to wake up to this reality. Whether it’s the extra minutes each day that your commute is taking from your home-life, the steady decline of our public school system relative to the rest of the nation, or the ever increasing sting of the property tax bill, everybody is starting to see and feel the pinch. Which is where the state legislature’s slight fumble finds its silver lining: a renewed interest in debating the merits of the tax code.
As you may or may not know, I produce a radio show on AM950 called “Minnesota Matters” (Live M-F 5-7pm!!), and after a few months of discussing the legislature’s budget plans I can tell you that the most sure-fire way to get people to call-in is to start talking about taxes. We don’t even have to talk about tax-hikes, a mere mention of the “tax” word is enough to get every person with a pulse to pick up the phone and try to get their opinion on the air. To some degree I anticipated this level of interest in the subject, but what I didn’t anticipate was the intensity of the response. A few people might call to opine on the merits of various solutions but then, inevitably, a rabidly anti-tax individual will call in to enumerate the reasons that the government has no right dipping its hand in his purse and the flood gates open on calls.
The responses to the tax question both on the show and on the street are as varied as the range of plans before the legislature, but I have picked up on one primary point of contention between the two sides of the debate: what is your fair share?
When you distill the debate down to its core contention there are, essentially, two camps: the dollar amounters and the percentagers. For those in the former camp, your “fair share” is more or less defined by the dollar amount on the check you write to the state (or the IRS for that matter). The expectation is that every member of society should pay in a defined amount; after all, a rich person doesn’t use the highways or the police appreciably more than a middle class person (there’s a debate even there, but just let me play devil’s advocate). And while for most members of this camp paying slightly more than the average for higher income people and less than the average for the destitute is negotiable, the “fair share” is still determined by the dollar. When the person you’re sparring with over tax policy exasperatingly asks the question of what dollar amount is “enough,” you know you’ve found a member of this camp.
For the second camp, the “percentagers,” one’s “fair share” is determined by a percent of their income. Under this measure the dollar amount on the check isn’t nearly as important as is the level of commitment relative to the individual’s means. Indeed, this is why the most recent tax incidence study has been trumped out so many times during this debate. The study indicates that when all taxes are considered the middle class in Minnesota is paying roughly 12.3% of their income to the state while the rich (defined here as making over 400K) pay in only 9.6%. Obviously, those who find themselves in the percentage camp interpret this as an example of the wealthy failing to pay their fair share. When the person you’re sparring with over tax policy exasperatingly cites the tradition of progressive tax policy in the state of Minnesota, you know you’ve found a member of this camp.
I put forth and attempt to define the distinction between these two ideological starting points because I think the lack of recognition of the depths of this difference prevents many honest discussions of tax policy from even getting started. I would postulate that there are more people who find themselves in the “percentager” camp but it’s surprising how many are on the other side and the range of circumstances from which they come. Personally, I would assert that it is a moral obligation for those who are better off to give more to the cause; an obligation that dates back to Abraham’s tithing in the book of Genesis. And there are also scores of economic theories that support the idea that the wealthier should contribute a correspondingly greater proportion. But, I digress.
Once we accept this difference of position and determine which camp holds the dominate opinion, we can move on to the more practical details such as whether higher income individuals should be made to give above the median rate, or how high the rate need be set. But until then we’re going to hit a roadblock every time we get to the line about “your fair share.”
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Matt,
You’re really good at this fair share argument. You set up the premise that the state is going to hell in a handbasket without any evidence of it and then lead people into believing they need to have their taxes raised. Here are the facts about spending in Minnesota. When Tim Pawlenty became Governor in 2003, the budget for the 02-03 biennium was $42.68 billion. The budget increased to $45.81 billion in 04-05. The budget increased again to $50.71 billion in 06-07. Pawlenty has proposed yet another increase to $55.06 billion for 08-09. Under Tim Pawlenty spending has increased 30%. The question is not how much is your fair share. The question is how much is the government’s fair share. I think 30% over six years is plenty. If you don’t like how the money is spent, you need to change priorities. But don’t pretend that our quality of life is declining because government spending went up 30% instead of 50% or 100%. If your quality of life is tied to how much the government spends, you need to re-examine your life.
Chris, please feel free to call into the show any time you like.
I disagree with your argument, for reasons that I just don’t have time to detail right now, but I respect it and it has a great deal of relevance.
Thanks Matt. I would enjoy the debate!
Chris,
Please ask the citizens of Rochester, Minnetonka, White Bear Lake, Burnsville, Eagan, Apple Valley, and many other communities around the state from the seventh and the eighth down to the first congressional districts why so many legislators lost their jobs. Why did these communities vote for a change? I know that Rep. Seifert likes to blame the war, but Minnesotan voters are smarter than that, and much more fickle. They know the difference between state and federal government, and they zealously vote for the candidate over the party.
So why did the DFL add to it’s majority in both bodies? It’s because of voodoo economics and fraudelent budgets. Everyone knows by now that the state doesn’t figure inflation into the spending side of their budget, but they do on the revenue side. This Enron-style of accounting is just a shell game. I think Minnesotans just want honest budgeting, whether that’s with a D-F-L or with a G-O-P. See anything by John Gunyou and Jay Kiedrowski for more information. FYI, they worked in the Carlson administration, a far cry from today’s conservatives.
Adam,
The numbers I have listed are the total spending per biennium since 2003. They came from http://www.budget.state.mn.us. Are you really saying that we have had 30% inflation since 2003? I don’t know an economist in the world that would agree that we have had 30% inflation.
Chris,
In 2003 we had to cut severely in most programs that contribute to our quality of life. In the current budget, accounting for inflation, we are just restoring many of those programs that were hacked to death in 2003. No, there was not 30% inflation in costs, but we are just restoring what we lost in 2003. We are so far behind in funding our roads, education and health care that it is a matter of quality of life to restore funding in those areas.
My guess is that the key for percentagers is “adjusted for inflation and population”. Inflation certainly has not gone up 30 percent but I’d guess that we must have added enough population to reduce the amount paid per person, again, percentagewise. Local governments like to add business and population because it spreads the burden amongst more people thus lowering the perentage that each of us pays. The percentagers want the percent that we pay to remain constant.
The measure of a man (or woman) is much more than treasure brought to St. Paul. All told, it is us commoners who owe the job providers.
tom,
We probably have added some population. However, population is not increasing rapidly in Minnesota. In fact there is talk of Minnesota losing a Congressional seat in the next reapportionment should population trends continue.
Then the Star Trib, Joel Kramer, etc. are not telling the truth since they insist that the state and local tax burden is decreasing per capita “adjusting for inflation and population”.
“Then the Star Trib, Joel Kramer, etc. are not telling the truth.”
Gee, ya think?
The overall inflation rate from 2003 to 2007 is probably closer to 10 percent than 30 percent (2-3 percent per year), but health care spending, which makes up a significant chunk of state spending, has increased far more rapidly than the general rate of inflation.
While it is true that because of the fact that health care is a larger portion of the state budget then the overall economy that state budget has a natural growth rate higher than inflation I don’t think there we should automatically accept the increased growth in spending.
A better solution would be to reduce health care costs. The fact that about 1/3rd of the work force works for government and another much smaller group gets it’s health care through government programs means the government has a large effect on the medical economy. If the state just says it will throw money at the issue there is no incentive to reduce costs in the system.