Taxes and budgets go together like a horse and carriage

The Governor’s 21st Century Tax Reform Commission is really starting to dig into its work. And it took just one comment from one of the members during last Friday’s meeting to reveal something this commission may be leaving out of the picture: what those business taxes pay for.

This is a group of very smart and experienced people charged with the task of providing recommendations on how Minnesota can improve its business climate. But there appears to be only one commission member – former State Senator Bill Belanger – who has ever had to balance the state budget. And it shows.

The point was driven home when one member asked what percentage of the state’s total revenues come from the corporate income tax – so how much money would the state lose if we eliminated it? “Seven percent,” was the reply. “So, if it’s just 7 percent, we could live with that,” said the member.

Excuse me?

The state is projected to raise $1.9 billion through the corporate income tax in FY 2008-09 (or 6 percent of state revenues for the biennium). Remember our “little” deficit problem this past session was $935 million. Try filling a $1.9 billion budget gap. 

Of course, I don’t mean to overreact. This commission is supposed to come up with revenue-neutral recommendations. And perhaps this particular member wasn’t really suggesting that the state could easily afford to lose 6% of its revenues.  But the members of the commission would do well to see the private and public sector in a partnership to create a positive business environment – rather than as adversaries.

Governor Pawlenty filled the commission with business executives (you can see the roster on their website), but it’s a good thing he added Senator Belanger. Hopefully Belanger will continue to bring a dose of public sector reality to the commission – as he did last Friday when he asked if State Economist Tom Stinson and State Demographer Tom Gillaspy would be invited to share some of the disturbing economic and demographic trends facing Minnesota (answer: yes, they will be invited). They might also add to the agenda the information on health care, K-12 education and higher education that has been presented to the Minnesota Budget Trends Workgroup (the powerpoints are available on their website). I think the commission would easily see that it is more than taxes that shapes our business environment.

There are some gigantic changes on the horizon – rising health care costs, retiring population, greater diversity in our workforce, and more – that will require a coordinated response from the private and public sectors. These changes could be opportunities. But they will just become huge problems if we continue to see business and government in conflict.

-Christina Wessel

About Christina Wessel

Christina served as the Minnesota Budget Project's deputy director until January 2014.
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One Response to Taxes and budgets go together like a horse and carriage

  1. Some people scoff at progressives who want to talk about state investment, as if it were only a subterfuge to slip higher taxes past the beleaguered taxpayer. But looking only at expenses instead of outcomes is a potential shortcoming of any group tasked to look at taxes — especially one that’s looking primarily through a business lens.

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