Rep. Ann Lenczewski, chair of the Minnesota House Tax Committee, is continuing to push the state to take a hard look at “tax expenditures”, the tax deductions, credits and exemptions written into state law.
These tax expenditures include such things as the JOBZ subtraction and credit, the long-term care credit and any number of deductions that lower the amount of tax the state collects. Lenczewski is not saying that all tax expenditures are bad, but they need the same scrutiny as appropriations. The problem is tax expenditures are regressive, she says. They predominantly go to the state’s wealthiest residents.
Lenczewski made her comments Sunday at an event at St. Louis Park’s City Hall, sponsored by the DFL Education Foundation. She first made her tax proposal last spring. Sunday’s talk helps set the stage for tax and deficit issues for the 2010 session and the upcoming governor’s race, where budget issues will be front and center. Tightening tax expenditures offer one avenue to increase revenue and rebalance the tax system.
“All the shifts and gimmicks are over,” Lenczewski says.
Minnesota’s budget is $35 billion over two years. Tax expenditures represent an additional $11 billion the state chooses not to collect.
Lenczewski seems particularly skeptical about using tax policy for economic development – whether tax expenditures are the most efficient way to create jobs.
She has seen huge pressure in the last year or two to move towards using tax expenditures for business subsidies, a move she opposes. In tight budget times, one way to make taxes more progressive is to reduce tax expenditures, not add them.
“The question is: Will legislators have the courage to not just look at how we ding cities and counties and roads and higher education,” but look at some of the $11 billion in tax expenditures? she says.
As an aside, Lenczewski said we should no longer consider ourselves a high-tax state. Minnesota tends to have higher state taxes to reduce service disparities among local communities. But if you combine state and local taxes, Minnesota now ranks 21st in taxes as a percent of income.