Three DFL guv candidates (and, in a separate segment, two IP candidates) debated last night in the studio of the TPT show “Almanac.” (The debates will be shown tonight on “Almanac” at 7 p.m.)
The DFL exchange got testy.
After frontrunner Mark Dayton again promised to get most of the money needed to balance the budget from higher taxes on the richest 10 percent of Minnesotans, his opponents, endorsee Margaret Anderson Kelliher and former state Rep. Matt Entenza, rejected tax of the magnitude Dayton proposes. Both said it would be a bad idea for Minnesota to become the highest tax state.
MinnPost/Terry Gydesen
Mark Dayton
Although I haven’t seen the numbers, and Dayton hasn’t spelled out his new taxes in detail, I don’t particularly doubt that the enactment of the Dayton plan would have that effect. Kelliher accused Dayton of proposing a 200 percent tax increase on the working men and women of Minnesota. I’d really need to see the math on that.
But when Dayton pushed back, demanding that the other DFLers specify how they would close the projected $5 billion or $6 billion deficit in the next biennium, neither of them had much of an answer. Kelliher and Entenza both like the word “balanced” to describe their approach, which fundamentally means a balance of tax increases and spending cuts. But it’s getting awkward that neither of them will specify tax increases or savings/cuts/deferrals anywhere near high enough to achieve the other kind of balance, namely a balanced budget, as required by the Minnesota Constitution.
The opening exchange went like this:
Dayton was asked about his tax-the-rich plan and whom it would tax and how much.
He said individuals making over $130,000 or couples making over $150K would pay “a little more,” he estimated less than $500 of new state taxes for those just above the 130/150 threshhold. But people making $500,000 would pay “much more,” he said, without giving a number. He added that the chairman of the United Health Corp., whom Dayton said had made $100 million last year, would pay “much, much more.”
(The reference to UHC was a not-too-subtle shot in the direction of Entenza, whose personal wealth derives from the years his wife worked for UHC, although no one mentioned this fact last night.)
“It’s not a question of tax or no tax, it’s which tax on whom,” Dayton said, noting that GOP Gov. Tim Pawlenty’s refusal to agree to any new state taxes had caused local property tax increases that have hit workers, farmers and those friends of all political rhetoric, “small businessmen.”
Kelliher on taxes and budget
Kelliher rejected the Dayton plan as way too taxy. But her statement was a study in ambiguity bordering on evasion. This is a rough transcript:
“We have to start with a budget that is going to take a balanced approach,” she said. “We have to deliver on our commitments to Minnesotans. We have to focus on jobs -- job creation, job retention -- and also focus on two important things, education and being able to deliver the health care we need.
“We need to make sure our tax system is fair and progressive. We agree on that as a principle. I differ a little bit on this: I think we shouldn’t become the highest tax state in the country.
MinnPost/Terry Gydesen
Margaret Anderson Kelliher
“I don’t think we should increase taxes 200 percent on working men and women in the state of Minnesota. But we should take a balanced approach. Take some of that income tax. Also close that corporate loophole. Also be able to cut off the sweetheart deals that are out there. And be able to take the balanced approach to balance this budget.”
A balanced approach would be fine, but up to this point, Kelliher’s approach has lacked any specifics and mostly seems to emphasize the people she wouldn’t tax and the programs she wouldn’t cut.
In the specifics contest, Entenza was perhaps in the middle. He seemed to say that 30 percent of the necessary deficit reduction “will come from raising taxes on the high end, closing some [word here that sounds like ‘foreign’] loopholes.” Like Kelliher, Entenza said “I don’t think we can afford a tax rate that’s higher than any other state.”
He said he would try to get the top income rates back up to where they were in 1998 (before the Ventura-era tax cuts). He doesn’t think high-income taxpayers can moan too much, and won’t be driven from the state by 1998 rates, since those were fat and happy days for the Minnesota economy.
He didn’t match Dayton for specificity, but he did say that about $2 billion of the deficit reduction would come from tax increases, $2 billion from cuts (he hasn’t specified anywhere near that sum worth of cuts, but at least it’s a number) and $2 billion from “deferrals,” which is also at least a number, although a troubling one, since the state’s biggest spending category -- K-12 education -- has already been subject to an almost $2 billion “deferral.”
Entenza talked about his No. 1 campaign theme: ushering in a new era of Minnesota prosperity by developing a “clean energy economy.”
MinnPost/Terry Gydesen
Matt Entenza
Kelliher too, although she isn’t as focused as Entenza on green energy, says that job growth will be an important part of the picture.
Of course job growth and prosperity should be important goals. But the governor who is inaugurated in January 2011 will have to almost immediately propose a budget that will eliminate a $5 billion-plus deficit left over from the accounting gimmicks of the current biennium. Job growth and economic development will take time and will presumably cost money at the front end.
More specifics
I’m no good at budgets or economics, and I’m plenty nervous on a political and practical basis about Dayton’s approach of extracting billions of new revenue from a relative few taxpayers (without, of course, driving them out of the state). But I’m plenty sympathetic to his demand that the other candidates -- including Republican Tom Emmer, who opposes new taxes but refuses to give a coherent answer on how he will balance the budget - must specify a combination of new revenue and spending cuts (excuse me, “savings” from new efficiencies) that will balance the budget while their long-range economic development ideas gradually take effect.
Dayton got in Kelliher’s face about that. Saying he was tired of being criticized for being the only one with a specific plan, he demanded to know: ‘”Where are you going to cut the $5 billion.”
Kelliher’s non-answer began: “I think we just disagree on the definition of who is rich,” saying that a couple comprised of a teacher and a policemen could end up with a joint income above $150,000. (Me: I guess so, but how is that an answer to the question of how, if you won’t do it on the tax side, you are going to balance the budget?)
Dayton brought up the excellent work the Strib editorial board did in eliciting deficit reduction specifics from guv candidates, noting that the Stribers concluded that he had the most specific plans while Kelliher was rated fuzzy.
Kelliher replied that the Strib piece was based on “old information,” but that she and her running mate, former Finance Commissioner John Gunyou, were working on a more specific plan.
I asked Kelliher after the debate where I could see that plan. She said it wasn’t finished yet nor has it been made public. I asked when it would be public. She replied “before the primary.”
Emmer, by the way, was offered a chunk of the Almanac hour, but since he has no serious primary opposition, he declined. TPT’s capitol correspondent Mary Lahammer did a taped piece on Emmer.
The opening Almanac segment featured Independence Party endorsee Tom Horner opposite publisher Rob Hahn, whom “Almanac” decided was his most serious challenger in the IP primary.
The two agreed on most issues that were discussed, except for Hahn’s proposal for riverboat gambling as a new source of Minnesota jobs and revenues (Horner says a riverboat would devastate the hospitality industry in the towns where it docked) and, of course, Hahn’s insistence that Horner withdraw from the race or that the IP strip him of his endorsement because of a poll that was taken and published that was favorable to Horner’s chances in the fall, but the pollster is a friend and supporter of Horner.
More like this
- Whom do you support for governor and why?
- Entenza takes the ice for Almanac's 'Budget Slap Shot'
- How does Horner budget plan stack up? Despite some concerns, 2 state finance experts see a lot to like
- A sampling of endorsements in Minnesota's DFL gubernatorial primary race
- Candidates for governor offer nuanced approaches to tackling Minnesota's education issues
Recent Stories
Most Commented
-
35 comments
-
32 comments
-
23 comments
-
21 comments
-
20 comments
Comments (28)
And the fun continues.
With every clear statement destined to alienate at least one voter, if not many, I predict it will be a very cold day in July before we see ANY clear statements from ANY of the candidates, right up to election day. Dayton included.
Much better to leave the voters deciding on the basis of general directions suggested, and unclear whether THEY will be affected.
As susual, we can't let a good crisis go to waste by suggesting specific solutions.
Thanks Mark Dayton for at least partly spelling it out. The other two waffle as bad as the Republicans. Remember the words of George Washington in his farewell address:
"bear in mind that towards the payment of debts there must be revenue; that to have revenue there must be taxes; that no taxes can be devised which are not more or less inconvenient and unpleasant;"
Eric Black writes
"Kelliher’s non-answer began: “I think we just disagree on the definition of who is rich,” saying that a couple comprised of a teacher and a policemen could end up with a joint income above $150,000."
If a teacher and a cop make $150K, or nearly 3 times median household income in MN, they can certainly afford to pay another $500/yr in taxes. Furthermore, I fail to see how their professions are relevant to the discussion. Surely speaker Kelliher wasn't merely pandering to special interest groups, was she??
Teachers and cops are PUBLIC employees with HUGE pensions and very good salaries (enough to make them rich in Dayton's eyes). I think that MAK inadvertently hit the nail on the head - we can not continue to SPEND SO MUCH MONEY in the public sector. Even though she will NEVER admit it, and expeciallly not to her union friends.
Is it possible to distinguish between structural and current shortfalls? If Dayton raises $4B in new taxes, it doesn't close the gap the first year. Could it the second year?
Given that this is THE issue of this election, every appearance by the DFL, GOP, and IP candidates should be met by this question.
After all, they MUST have a real budget put together a few short weeks after being sworn in.
Dayton is not my favorite, but good for him!
After Rybak lost the caucus, I had grudgingly conceded to respecting the caucus process and sticking with Kelliher. I was somewhat irritated by Dayton's barging in, particularly given that he was no star as a senator. But MAK is really doing nothing for me, and I'm impressed by Dayton's honesty and straightforwardness - even if it'll take more than taxing the rich to get there.
A speaker named Maud Barlow pointed out during a recent speech in Toronto that 50 percent of the world's people -- the bottom half economically -- owns only ONE PERCENT of the world's wealth.
By 2020, she said, this 50 percent will live in slums, most likely without access to such "amenities" as education and health care. Much less clean air, clean water, and the disappearing forests that provide us with oxygen.
Much of this disaster is no doubt due to the insistence by governments and institutions like the IMF and World Bank that prosperity lies in cutting taxes for the rich (you know, the plan for trickle-down that failed for Reagan, Bush I and Bush II, the one pushed by the Club for Girth... pardon, the Club for Growth ...growth of corporate profits no-matter-who-it-hurts).
The G8/G20, clinging still to Milton Friedman and Ayn Rand and financially dim right-wing pols, concentrated on helping the top 10 percent of the world's population.
I'm with Dayton on this matter. The rich have had a great ride since 1980 and especially since 2000 while governments transferred ever more of the tax burden to the poor and middle classes.
I would recommend to Margaret and Matt: (1) a return to the 1998 tax levels in Minnesota and (2) a surcharge (10%) to the incomes of those making over $500,000.
Someone, somewhere has to fervently oppose this division of the world into a tiny wealthy elite served by billions in poverty if it is ever to end. It might as well be our new governor, whichever of the three that turns out to be.
It is “fun” watching the DFL candidates run fast to the left. Of course, Mr. Dayton will win because he an expert at “running.”
Dayton: I have to give him credit for sticking with his tax increase on the "wealthy". Dayton calls this "justice". If that means wealthier people pay more let's be clear that this is efficiency and not justice.
Speaker Kelliher: What can I say? All she can do is watch the Dayton juggernaut roll into the primary.
Entenza: His answer to jobs is Alt energy. Ah, ethanol, a subsidized fuel made from a subsidized crop. Now if we could only complete the trifecta by subsidizing automobile travel...
Nobody seems to be talking about the long term structural deficit. Which relates to an aging population. Two questions should be; where will the money come from and how will it be spent?
John E.lacano has it right. For these three candidates, the fewer the details the better.
Bernice:
Since every single person, even the homeless one, is "rich" compared to those who "own 1% of the world's wealth" worldwide, why not impose a minimum tax of $100.00 per person on every U.S. citizen for worldwide distribution, just to even things out.
That would include the 50% of Americans who pay NO income tax at all at the present time.
Re "an aging population":
People are healthier now at 70 than they were at 60 when Social Security was set up.
The only long term answer is to increase the retirement age.
The problem is not aging per se; it's being supported for 20 or 30 years after retirement.
This means, of course, that we'll have to also deal with the real structural problem of generating enough jobs for the increased work force that results from raising the retirement age.
These are problems that will have to be dealt with on a national level.
It seems fitting that the page I am looking at that has this post contains an ad for Northrop Dance season. Nice placement!
Where the budget is concerned, Margaret offered no specifics about where she would make cuts, Dayton seemed to deny the necessity of making cuts, but was specific about a tax increase that has no chance of being enacted.
Is it possible to be both candid and disingenuous at the same time?
During the Almanac discussion, there was a dispute between Dayton and Margaret on education cuts, Mark claiming that the legislature was proposing deeper cuts than the governor. What I think he was talking about there was the across the board cut of 7% proposed with an uncertain degree of sincerity by the Senate DFL caucus. My impression of that proposal was that it was more than anything, an attempt to set out some sort of bargaining position, one that was never taken seriously by anyone else at the capitol.
"People are healthier now at 70 than they were at 60 when Social Security was set up."
They are healthier because they have greater access to health care, particularly prescription drugs, the cost of which wasn't foreseen when Social Security and Medicare were enacted. But the increased cost of health care is only one factor driving the deficit, the other is the proportion of the population that is aging into the programs.
@15 Hiram, I wonder if MAK would consider using an updated version (2.0) of the DFL budget that was laid on the governor's desk prior to his decision to unallotment.
That particular budget did have cuts which were across the board and in fact larger than the governor's proposed budget. It might be good if MAK were to remind folks that she could make the hard choices (budget cuts) as governor.
The fact is, there weren't that many differences between the governor's cuts and the DFL's, and what Democrats tell me is that theirs were a bit larger. The difference was in how to cover the deficit.
The problem going forward is that the deficit that the next legislature will have to deal with, in the neighborhood of 6 billion dollars, is much larger than the deficit the current legislature dealt with. What I have been told over and over again by people who seem to know is that it is impossible to balance the budget for the next biennium without some combination of cuts, tax increases, and borrowing. Margaret, whose knowledge of state finance is vast, knows this very well, and she also knows that there will be painful cuts. She does try to sidestep the issue, when Dayton presses her on it, but she won't say there won't be cuts. Meanwhile, Dayton avoids the trap he sets for Margaret by proposing massive tax increases, which if enacted would avoid the need for cuts. It's just that there is literally no possibility that any legislature capable of being elected this year will enact tax increases on anything like the scale Mark is proposing.
Expenditure cuts are problematic policies during an economic downturn because they reduce overall demand and can make the downturn deeper. When states cut spending, they lay off employees, cancel contracts with vendors, eliminate or lower payments to businesses and nonprofit organizations that provide direct services, and cut benefit payments to individuals. In all of these circumstances, the companies and organizations that would have received government payments have less money to spend on salaries and supplies, and individuals who would have received salaries or benefits have less money for consumption. This directly removes demand from the economy.
Tax increases also remove demand from the economy by reducing the amount of money people have to spend — though to the extent these increases are on upper-income residents, that effect is minimized because much of the money comes from savings and so does not diminish economic activity.
At the state level, a balanced approach to closing deficits — raising taxes along with enacting budget cuts — is needed to close the state budget gap in order to maintain important services while minimizing harmful effects on the economy.
Speaker Kelliher and Tom Horner are the two candidates that have advocated for this "balanced approach" throughout their campaigns. From my experience, it's hard to contract your way to growth.
"Expenditure cuts are problematic policies during an economic downturn because they reduce overall demand and can make the downturn deeper."
Very true, but the problem is that the state government is required to balance it's operating budget. Unlike the federal government, the state of Minnesota can't go into debt. Now there are ways around that. We can (and did during the last legislative) borrow for the capital budget. That's the bonding bill. People like me advocated a larger bill than the governor was willing to approve, but the fact is the governor did approve a bill with substantial borrowing which will be stimulative.
Another way the government borrows is through the use of shifts, particularly where schools are concerned. It seems to be the case that while the state can't borrow, school districts can so the state reduces the amount it pays to the schools forcing the schools to borrow to cover the state funding shortfall. Sort of like spendthrift parents, who "borrow" their kids' credit cards. The governor, who doesn't like tax increases, but has no principled opposition to borrowing money, in effect shifting the tax burden to his successors, had some other schemes as well; securtizing various revenue streams, for example.
But the upshot is really that the state really isn't in a position to engage in a lot of stimulative deficit spending. That sort of thing has to be done on the federal level.
"Tax increases also remove demand from the economy by reducing the amount of money people have to spend — though to the extent these increases are on upper-income residents, that effect is minimized because much of the money comes from savings and so does not diminish economic activity."
You see a lot of arguments about this sort of thing on the right wing blogs. Applying a form of their logic, tax increases don't affect overall demand at all; it's just the state, not individuals, doing the demanding. While I agree that increasing taxes is not the right policy in a recession, the state constitution and the nature of state finance doesn't provide very many viable alternatives. This goes to the vicious circle at the heart of recessions, that what is correct for people to do on an individual basis, rein in spending, is bad on a macro level in that it reduces demand for goods and services further aggravating the slowdown. They don't call economics the dismal science for nothing.
While all the candidates avoid discussing is the structural deficit, the fact that taxes aren't covering expenditures. John Gunyou, Margaret's running mate describes these problems very concisely, and very eloquently, but even he offers no answers, and hasn't been particularly visible lately.
Excellent analysis Hiram. You are correct to point out that the devil is always in the details. What some folks have a hard time separating, are the short term and the long term deficits. More so as it relates the federal budget.
The "balanced approach" would give the next governor more "levers" from which to choose from. I am not so sure that Rep. Emmer gets that. He is caught up in the Hoover like austerity that the GOP represents. While there are deep and meaningful cuts to be made, revenue needs to be a part of the equation as well.
Hiram, how do you feel about Tom Horner's proposal for a broader sales tax and his proposal to decrease capital gains?
"how do you feel about Tom Horner's proposal for a broader sales tax and his proposal to decrease capital gains?"
As a matter of pure tax policy, and as one who favors at least a mildly progressive tax system, I am open to extending the sales tax to clothing. Sales taxes on clothing are generally seen as progressive. Among other things, I think broadening the base for the sales tax, particularly with clothing would stabilize it as a revenue source. I do have some questions. Is what's being proposed revenue neutral? One way to do that would be to lower the tax rate, the difference to be made up by the revenue generated from previously untaxed items. If not, even a progressive tax increase is still an increased burden on low income earners.
As for increasing the capital gains tax, I have never fully understood why income generated by a couple of calls to a stockbroker is taxed at a lower rate than income earned in the process of working for a living. I believe one of the root causes of our current economic crisis is that we have created a tax system that favors businesses that just manipulate numbers over those that actually create products that people need.
One area of tax policy that really bugs me is the exemption of interstate purchases from the sales tax, particularly over the internet. Why do we have a tax policy that favors businesses that have no presence in the community over those who do, that effectively rewards companies for their decision not to contribute to local economies?
Hiram and Richard:
Very helpful and thoughtful discussion.
Regarding internet sales tax, one must keep in mind that Minnesota has a USE tax as well, and anyone who buys over the internet is supposed to report the purchase and pay the related use tax on it.
Honored more in the breech, I suspect.
I suspect that too.
Hiram and John, I suspect that internet commerce is in the sights of many revenue hungry states. With tax revenue shortfalls what they are, the internet seems like low hanging fruit. The only impediment is that Congress needs to approve it.
//A 2009 University of Tennessee study estimated that uncollected sales taxes on e-commerce cost states $7.7 billion in 2008.// http://www.newrules.org/retail/rules/internet-sales-tax-fairness
Taxing income always was a bad idea, and it still is. Income, especially hard-earned income, is a good thing and should never be discouraged. We should instead tax the consumption of goods and services with negative externalities and high social costs. But in the end, we need to focus on paying for what we get with minimum distortions, not on classes of people.
On "balanced approach"
When times are good, I hear little cry for a "balanced" approach. No-one seems then to feel that prudent pruning should occur.
I conclude that "balanced approach" is code for "Puleeze! Just let me tax SOME, at least."
And my response is always "PROVE that prudent management would HAVE to raise prices before you do that." No-one on the pro-tax side seems to want to do that.
As an old cost accountant, this is offensive to me.