Column: Time for tax reformST. PAUL - For more than a decade, Minnesota has spent more than we raised in revenue, cut essential public services and increased the burden on property taxpayers. State leaders borrowed billions from our school and pushed Minnesota's fiscal challenges off for another day. It is time for a change.
By: Myron Frans, Minnesota Revenue Commissioner, Worthington Daily Globe
ST. PAUL - For more than a decade, Minnesota has spent more than we raised in revenue, cut essential public services and increased the burden on property taxpayers. State leaders borrowed billions from our school and pushed Minnesota's fiscal challenges off for another day. It is time for a change.
An honest, vigorous debate is a healthy part of our budget process. We may not all agree on “how,” but all of us want our state to have the best schools, healthy communities, and a thriving economy with growing businesses and a strong middle class.
Governor Dayton’s proposed budget delivers all of these. If adopted, it will end the near-constant deficits Minnesota has experienced over the last decade. The plan balances the budget, eliminates our $1.1 billion deficit, and repays $1.1 billion we owe our schools. And it makes crucial investments in our greatest resource: the people of Minnesota.
More than that, the governor’s plan will stabilize our unfair and outdated tax system and provide important incentives for businesses to locate or expand in Minnesota.
The governor’s balanced approach invests in Minnesota while reforming state government to ensure we get the best value for each dollar spent. It provides:
* Strategic investments in education, job creation and economic development. Helping our children succeed and providing Minnesota businesses with a high-quality workforce to stay competitive in today’s global economy.
* A predictable and stable budget. Avoiding one-time fixes and borrowing, providing stability and predictability to help businesses plan for the long-term.
* Fair taxes for all Minnesotans. Balancing the major state and local taxes (income, property and sales) so that each generate about one-third of the all revenues, reducing Minnesota’s overreliance on property taxes and modernizing our outdated sales tax code.
To help pay for these investments and reforms, the governor asks the wealthiest 2 percent of Minnesotans — couples making over $250,000 per year (taxable income) — to pay their fair share in taxes. His plan closes business tax breaks that benefit only a few corporations so that all corporations benefit from the largest corporate income tax rate cut in 26 years. And it extends the sales tax to more goods and services while cutting the rate by 20 percent — the largest sales tax rate reduction in Minnesota’s history.
Most Minnesotans — 98 percent — will see no tax increase under this plan, and many will benefit from the governor’s $500 property tax rebate for homeowners.
Critics have zeroed in on the governor’s proposed sales tax changes. But the governor’s proposal will not raise sales taxes for consumers. More goods and services will be taxable than before, but the rate cut means average Minnesotans will not pay more sales tax as a result.
Some businesses may pay more sales tax under this plan, but for many that will be partly or wholly offset by other parts of the package. The overall impact on each business depends on the reduction in sales taxes they already pay and other factors.
Taxes are certainly one aspect that businesses consider, but they are not the whole story. After all, businesses also benefit from the investments we make in education, infrastructure and economic development.
As Gov. Dayton noted in his State of the State speech, Minnesota is not a “low-tax” state, but tax rankings do not tell the whole story. For example, we rank 15th among states for taxes, according to the Minnesota Center for Fiscal Excellence. But we must be doing something right, because we also have the 11th-highest per capita income in the nation.
The governor’s proposal is a cohesive and sustainable package. Each piece helps meet his goals to create jobs, strengthen the middle class, deliver a fair and stable tax system, and provide public services that give Minnesotans the best value for their tax dollar.
The governor invites critics and supporters of his plan to share their ideas to make it better, or to accomplish the goals he has set in other ways. Critics have focused on what they see as the plan’s shortcomings — in some cases, quite harshly — but we have yet to see their own proposals.
This is a defining moment for our state. It is time to set Minnesota on a new path to economic growth, fairness and budget stability. The Dayton administration stands ready to work with the Legislature, and with all Minnesotans, to make that happen.
Revenue Commissioner Myron Frans worked as a tax attorney for 27 years, most recently as a senior partner at the law firm of Faegre & Benson in Minneapolis.