Column: Tax man must face reality
ST. PAUL -- With all the news channels running fact checks on the validity of campaign ads that have bombarded our TVs, I thought it was time to run a campaign reality check on DFL candidate for governor Mark Dayton. Not so much to measure the true vs. false, but rather the actual potential for effective execution.
Do I believe that Dayton wants to "tax the rich" and increase personal income taxes by $4 billion? Yes, I believe that's true.
But once you measure the chances of being able to actually balance the budget with his plan, it becomes clear that he might as well be running a campaign based on the slogan "Farm the money trees."
For months now Dayton has been pounding the airwaves with his message of how he, if elected governor, will make "the rich pay their fair share." This is a solid populist message, making someone else pay for the benefits and services used by the majority.
This tax message most likely played at least some part in Mr. Dayton's victory in the DFL primary election last week.
It always sounds good to tell someone you are going to balance the budget by taxing the other guy. But certainly there were enough Democrats in Minnesota who either believed this plan would work, or they just liked Dayton better than the other DFL candidates in the race. Garnering some 180,000 votes, Dayton secured a victory that was most likely due to a combination of both.
Dayton's $4 billion tax increase message may have appealed to DFL primary voters, a group that is likely to be philosophically more liberal than your typical DFL general election voters. But in the general election his message to raise income taxes so significantly is likely to fall on deaf ears.
The reason is simple: Most people are not fooled by the "tax someone else" sleight of hand. When upper-middle-income Minnesotans realize that Mr. Dayton's tax plan raises taxes on households with income of more than $150,000, they know he's going to increase their taxes -- not just someone else's.
Secondly, while Democrats talk about "taxing the rich," what they really do is raise taxes on all Minnesotans. In the last two years there have been two major tax increases.
The first was a $6 billion tax increase on gasoline and auto licenses. The second was a $250 million per-year sales tax increase, for environmental and cultural programs.
While these two tax increases were the only ones passed into law, the DFL-controlled Legislature also passed increases in the income tax, tobacco tax and alcohol tax -- only to have them vetoed by GOP Gov. Tim Pawlenty.
The bottom line is that most people aren't fooled by the Democrats "tax the rich" slogan, because they know the end result is higher taxes on everyone.
Let's not forget that in addition to Mr. Dayton's $4 billion increase in personal income taxes, he is also proposing an additional $385 million in business taxes.
Does anyone believe that increasing business taxes during an economic recession is a method to promote job growth?
While Dayton's plan to increase taxes would spell economic disaster, it is also unrealistic. If Mr. Dayton is elected, and somehow his tax plan gets passed by the Legislature, it would never yield the revenue that he projects it would. Economic production, jobs and capital are more mobile than ever in today's economy. Individuals and businesses would alter their business practices in order to avoid paying what would be one of the highest taxes in the country.
In an attempt to execute the "tax the rich" plan, we would be potentially losing valuable contributing taxpayers-economic logic would lead to business migration. I have to believe that at some point the high-wage-earners would choose to opt out of higher taxes by voluntarily lowering their taxable income and/or moving their income to places with lower effective rates.
But the most obvious shortcoming of Mr. Dayton's tax plan is I don't think it would ever pass the Legislature.
If Mr. Dayton really thinks his plan could work, he should ask how many legislators would support it. Perhaps a good place to start is with the current tax committee chairs, Sen. Tom Bakk, DFL-Cook, and Rep. Ann Lenczewski, DFL-Bloomington.
In the last two weeks of the 2010 session, the DFL leadership proposed a $400 million income tax increase on upper income Minnesotans to fix the $1 billion budget shortfall.
That legislation represents just one-10th of the tax increase that Dayton is proposing, yet it passed by one vote in the Senate and only by four votes in the House.
Political pundits from both sides of the political aisle are predicting that Republicans will pick up seats in both the state senate and state house. Whether it will be enough to gain majority status in either body, we won't know until after the election.
But if there are additional Republican legislators serving during the 2011 session, it seems virtually impossible that a Gov. Dayton could convince enough legislators to vote for such a whopping tax increase.
It's time for Mark Dayton to have a reality check on his tax plan.
Phil Krinkie is a former Republican state representative from Lino Lakes and president of the Taxpayers League of Minnesota.