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Minnesota's budget battle lines drawn: Fear vs. Fair

Gov. Mark Dayton outlined his budget at the Department of Revenue Building on Tuesday.
MinnPost photo by James Nord
Gov. Mark Dayton outlined his budget at the Department of Revenue Building on Tuesday.

The Minnesota budget battle now comes down to this: Fear versus Fair.

This morning, Gov. Mark Dayton presented a budget that fulfilled his one major campaign promise. In the name of fairness, he wants to tax the rich.

Over and over again, the governor and some of his commissioners talked about the "balance" and "fairness'' in the plan the governor unveiled to tackle the state's $6.2 billion deficit.

Sparing aid to cities and schools
He would raise the taxes on the top 5 percent of wage earners in the state by about $3 billion and make up the rest through budget cuts that spare Local Government Aid but make cuts to higher education and even nursing homes as well as trim the state workforce by 6 percent. K-12 education would receive the increase that Dayton promised throughout his campaign.

"This budget proves I'm a man of my word," he said in unveiling the plan.

Dayton repeatedly said that he believes the rich will see the "fairness" in his fourth tier for couples earning $200,000 (a rate boost of 1.9 percentage points) and the additional surcharge of 3 percent on incomes of more than $500,000 (for a married couple). Additionally, he wants to impose a property tax bump on those living in homes valued at more than $1 million and he wants to tax snowbirds, those who declare residency in low-tax states, such as Florida, but spend considerable time "back home" in Minnesota.

He also repeatedly said that 95 percent of Minnesotans will face no tax increase and that his plan should prevent further increases in property taxes and fees, which have skyrocketed in recent years.

In Dayton's eyes, it's all about fairness.

But the Republicans were quick to counter. Their underlying message emphasized a fear factor — fear, that is, of the business community's reaction and the ripple effects from the uncertainty they say the tax proposals will cause.

With "the highest taxes" in the country, Republican legislative leaders predicted that Minnesota would not be able to compete for new businesses and new jobs. They predicted that the Dayton plan would chase old businesses out of the state.

Those 95 percent who wouldn't see a tax increase under the Dayton plan?

"Making Minnesota the highest-tax state is not just going to affect the 5 percent,'' said House Majority Leader Matt Dean. "It will affect the other 95 percent, too."

House Speaker Kurt Zellers
MinnPost/Jay Weiner
House Speaker Kurt Zellers

Added House Speaker Kurt Zellers: "Moms and dads are going to be worried about losing their jobs."

In the eyes of Republicans, it's all about making Minnesota more business-friendly. The wealthy are the job providers.

"This [Dayton's] proposal puts your faith in government," said Zellers. "Our faith is in the job providers."

Both Dayton and Republicans will take those messages on the road Wednesday. It will sound a whole lot like the campaigns that we thought had ended in November.

It was, of course, the voters that set all of this up by dividing political power between a DFL governor and a Republican-controlled Legislature. And both sides are repeating the messages that made them winners.

Neither side won by much.

Dayton at a disadvantage
Dayton faces a couple of big disadvantages as he heads out to sell Minnesota on why his plan his best for the state's future.

First, he's the one that has to defend a budget that includes something for everyone to dislike.  

For example, big-hearted as he is, Dayton still had to make cuts to nursing homes and increased surcharges on those facilities to arrive at a balanced budget.

The ink had barely dried on the proposal when Patti Cullen, president of Care Providers of Minnesota, attacked it.

"If Governor Dayton's proposal were to become law, the caregiver wages and benefits will be cut again and there will be jobs lost," she said. "In addition, nursing facilities on the brink of closure are certain to go over the edge."

But hey, even Dayton doesn't like his budget: "This is not ideal, but it's the best I've been able to achieve."

The second problem for Dayton is that DFL legislators refused to embrace his proposal.

House Minority Leader Paul Thissen and Senate Minority Leader Tom Bakk repeatedly refused to say that they would vote for the budget as it was presented.

They hemmed. They hawed. They said they'd have to see the details.

Thissen argued that before anyone makes a decision about whether they support Dayton's budget proposal, the Republicans should have to show what their cuts-only budget would look like.

"The focus should be on the Republicans," he said. "Can they produce an all-cuts budget?"

The GOP lawmakers say they can, of course.

But it's easier to say it than produce it.

Additionally, it's easier to attack Dayton's budget than to come up with a counter-proposal.

Republicans hemmed and hawed when asked when they would come forth with their master budget plan.

In the meantime, they'll attack the Dayton proposal. "This is a feeble and pathetic attempt," said Zellers.

GOP legislators face problems, too
But Republicans have a bit of a problem, too.

Dayton argues that his fourth-tier income tax increase on couples making taxable incomes of $200,000 or more will merely put the top wage earners in line on a percentage basis with what the middle class is paying.

Currently, the lower 90 percent pays taxes at a 12.3 percent rate. The top 10 percent pay 10 percent. The top 5 percent pay at a 9.7 percent rate and the top 1 percent pay at 8.8 percent.

Republicans have to argue that somehow it's reasonable to protect the wealthiest from paying an equal share while at the same time cutting programs for the most vulnerable.

Dayton surely will receive help on his campaign from local government officials and school administrators.

Soon after Dayton's budget was released, Minneapolis Mayor R.T. Rybak and St. Paul Mayor Chris Coleman were singing Dayton's praises.

But Republicans can turn to their allies in business, Tea Party Patriots and other conservatives who think it's time "government lives within its means."

All of this will end. Dayton, and, to a lesser extent, Republican leaders, said that the May 23 close of the legislative session leaves plenty of time for talk.

But right now, it's hard to see where the governor and the Legislature can come together.

They can't even agree on the percentage size increase Dayton seeks for the 2012-13 biennium.

Dayton says his budget calls for a 7 percent increase over the current biennium, a fairly modest amount.

Republicans, however, keep saying he's seeking a 22 percent increase.

The difference?

Republicans don't count the one-time federal stimulus money that helped balance the budget in the current biennium, nor did they count the nearly $2 billion that was shifted into the future by last year's Legislature.

Senate Majority Leader Amy Koch
Senate Majority Leader Amy Koch

Using those funds to balance the budget was "irresponsible and incorrect," said Senate Majority Leader Amy Koch.

But wait a minute. Wasn't it Gov. Tim Pawlenty who signed off on that budget-balancing act? Was he irresponsible and incorrect?

Koch muttered something about her viewing things as a legislator and quickly moved on to the next question.

So what it all means is that agreement will come hard. And at this moment, it's the governor more than the Republican legislative leaders who seem to understand the need for compromise.

"This will not be the budget enacted on May 23," Dayton said after the long, exhaustive presentation of his budget. "Compromise means you have to give up some of what you want and some of what you promised."

Republicans didn't seem ready to accept that definition of compromise today.

This debate is about "fundamental principles. … This [the governor's proposal] is just a bad idea."

Sometime in the next couple of months, the Republicans promise to put forward their own idea.

Doug Grow writes about public affairs, state politics and other topics. He can be reached at dgrow [at] minnpost [dot] com.

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Comments (18)

I would like to ask Patti Cullen, president of Care Providers of Minnesota, how bad the cuts to her programs will be if the GOP budget prevails? If all $6.2 billion on balancing comes in cuts, they'll make Dayton's proposal look like a cake walk.

That's just ideologically-correct stubbornness to say it's about fundamental principles. Laying out their principles for a campaign, sure, but not it's about the practicalities of getting it done. Did all the practical Republicans get drummed out of the party? Anyway, isn't keeping the state functional a principle? That's one principle they seem to have little hesitation about tossing out.

...Sometime in the next couple of months, the Republicans promise to put forward their own idea....

Certainly our Republican legislators would not have promised more than they are willing to commit to?

A month has passed since the beginning of the session. There was no mystery going into the election or the session as to what the 500 pound gorilla was. That was known over a long time ago.

So months have gone by, with plenty of flapping their lips as to "waste, fraud and abuse", "fat government", "zero-base budgeting" and none of them have a proposal to completely address the shortfall?

Seems to me that that they got into office under false premises and promises.

Some people will say anything to get elected.

This budget is nothing more than a political pay-off to the entrenched special interests that give the DFL the money.

Please never use the term "fiscally conservative Democrats" again.

Obama, and now Dayton, have proved that the "tax and spend" label is a perfect fit for their party.

Until Republicans produce an alternative, all we're hearing and seeing is a "jeering section" in the bleachers. They have no credibility, and ought to be ignored by the media, until they've produced that alternative to Dayton's plan. THEN they'll have earned some attention. Until that point, it's just caterwauling by the selfish.

If they can balance the state's budget entirely by spending cuts, at least on paper, then let's see what they come up with – and they should be able to produce something in less than 2 months. If all you're going to do is cut programs and spending, the only balancing required is to spread the bloodshed around, and most of the rhetoric I hear from Republicans has the same mean-spirited tone we're accustomed to from the radical right, so perhaps they won't even bother trying to spread the burden. They'll just begin by cutting any and all programs that benefit those of modest incomes, increase the profitability of corporate Minnesota through tax breaks, and tell us that the resulting catastrophe is merely the free market at work.

What a waste of time. A Governor elected with 43.6% of the vote, a smaller percentage of the electorate than even Pawlenty, comes forward with an absurd tax and spend proposal. This guy has no mandate, but the folks in the House and Senate certainly do - all elected with votes in excess of 50%. Fortunately these tax increases will never see the light of day - let's move on to the cuts that are necessary for a balanced budget

When Mr. Gotzman produces a model of government that requires neither revenue nor spending, I'll be interested in seeing it.

The issue is not – nor should it be – WHETHER to "tax and spend." Any government, of any size, in any location, requires money to operate, and spending money is how it delivers services. The argument should be over how *much* to tax and how *much* to spend.

Rationally, it's perfectly reasonable to suppose that there might be "fiscally conservative Democrats." Just as rationally, it seems reasonable to suppose that there might be "fiscally liberal Republicans." The latter, of course, have now been driven out of the party, but there used to be some.

As for the political payoff, we've already seen from Republicans, in the form of proposals to further cut taxes on businesses and the wealthy, exactly that same behavior, from the same sort of "entrenched special interests" that so disturbs Mr. Gotzman. I'm all for a political system that eliminates money and special interests from the political process. So far, at least, I've not seen anything that comes close to reaching that goal.

First, as Tim Pawlenty and George W. Bush proved, the Republicans don't believe in tax and spend.

They believe ONLY in borrow and spend - they always get elected promising to cut government and end up making it much bigger, but rather than paying for it as any responsible family would do, they just borrow the money - in Pawlenty's case, from the future - by shifting massive obligations a few months down the road when he wouldn't have to be deal with paying them off - the Governmental equivalent of the "dine and dash" college prank of many years ago (and his Republican colleagues still haven't figured out that he left THEM holding the bag).

Second, can we all please see through the B.S. about a "better business climate?" Our Republican friends LOVE to trot out that old bumper sticker to justify everything they do and imply that their vaunted BBB will automatically create a better JOBS climate (anybody remember the campaign pledge, "jobs, jobs, jobs?")

But we've had eight years to see what their BBB really does: massively enrich the fabulously wealthy, save those who can most easily afford to pay them millions in taxes, raise unemployment, and lower the standard of living of those regular folks who continue to be employed.

---The was not one single well-paying job with benefits created by any of Governor Pawlenty's efforts---

Turns out that, for average citizens, the BBB is really BSBSBS. Let's call them on it.

Where are those jobs they promised? Where are their job-creation proposals now? Nowhere, because they don't have a clue how to create jobs. They only know how to pad their own pockets and those of their friends.

Thank God we have Governor Dayton to stand in their way and force them to be responsible to the rest of the population of the state of Minnesota in the ways they negotiate this Governor Pawlenty-created budgetary mess!

If Gov. Dayton had real courage he would freeze the bank accounts of everyone making over $150,000 and just take the money the state needs. From each according to his ability to each according to his need is a great philosophy.

We saw how well that concept worked for the Soviet Union. Granted,the approach is imperfect. For example, current practitioners like Venezuela have no electricity. Cuba has no toilet paper and North Korea has no food. But hey, everyone in those countries is miserable and that is the noble goal Mark and his supporters are aiming for — equality.

I fail to see how slashing the state budget and laying off workers will improve the unemployment. Of course it will improve the "business climate" because there will be more unemployed willing to accept lower pay because that's all they can get.

I pray that Dayton will follow the Pawlenty model of governing: veto veto veto until you get what you want.

What happens if the Repubs get their way and taxes aren't raised by the state. Then the state cuts LGA (I think that's the term), local goverments raise property taxes to compensate. End result is taxes on the middle class go up and the system gets more regressive.

The Star Trib has the same argument that we need all those rich people who will leave the state if we don't baby them tax-wise, that we need a regressive tax structure. When did that perverted idea seep into American politics? What a load of BS. I can't believe lower and middle class people can vote Repub except on social issues. On economic issues they are just shooting themselves in the foot.

What is fair about forcing the people who are already paying almost all the taxes in Minnesota to pay more? The public is brainwashed into thinking the rich pay no taxes due to loopholes. The reality is the top 5% of earners already bear more than half the burden of income tax revenue.

What is fair about forcing a business owner to to sacrifice almost all his profit in a boom year, leaving him nothing for cushion in bad years and nothing to reinvest for the future? A significant share of the "rich" that will suffer under Dayton's tax increase are small businessmen and farmer's whose income varies wildly.

I have been in the work force for 40 years and I am in no danger of paying any extra taxes under Dayton's plan. But just because I don't make a lot of money doesn't give me the right to steal it from people who do. Your use of the term fairness makes me sick.

It would be helpful if we could deal in specifics, as opposed to blanket statements about business climate, job creation and government living within its means. These sound nice to some people and mean absolutely nothing.

I applaud -- yes, applaud loudly -- Governor Dayton for laying his plan on the table. He needs to continue to make -- and with the participation of Democrats in the Legislature -- arguments about fairness and common good, supported by specific proposals that advance those goals. Yes, there will be pain -- lots of it. This should surprise no one. But the question is do we share the pain or allow the most affluent and privileged to act selfishly and avoid their responsibilities to the state.

Republicans in the Legislature will take potshots and resort to platitudes. So what? They have equal responsibility for governing now. Nothing focuses the mind like having to make decisions that may actually have consequences. At some point, the Legislative majority will have to provide specifics on how they plan to balance the budget. They will have to put their ideas on the table and attach some numbers and programs to them. Then we can have a full discussion on what is at stake.

We shouldn't be lulled into letting the Republican majority get away with mouthing the same old rhetoric. They wanted to govern, now govern. That or get out of the way.

Ah excuse me Jeff Michaels but if I'm not mistaken there is something in our Declaration of Independence about equality.

I don't know I could be wrong I could have missed that day in elementary school.

Yes Neil, all men are created equal. However, due to hard work, investment, ingenuity, and risk-taking, some people achieve a better outcome than others. And it is pure evil to penalize them for it.

Did a quick check on the top five states with the highest tax burdens per the Tax Foundation (via About.com) http://taxes.about.com/od/statetaxes/a/Highest-State-And-Local-Taxes.htm
which were NJ, NY, CT, MD, HI

Then I found an article in Atlantic on the best performing state economies in America, and I found that all of the above (except NY which was 26th) were rated in the top half fo all states.
http://taxes.about.com/od/statetaxes/a/Highest-State-And-Local-Taxes.htm
Breaking it down, NJ (21st), NY (26), CT (20), MD (9), and HI (10) - Minnesota was ranked 5th, btw.

The point being that there is little indication (at least from this very simple down and dirty study) that correlates high taxes with a poor economy.

Mohammad - We have different definitions of "pure evil." I was thinking of the Holocaust.

In one way or another the Republicans keep pumping money our to the upper income folks in hopes of them creating jobs. Understandably they keep sitting on the free money because they are not the one that create jobs. Product demand is what creates jobs. Without product demand there will be no hiring. The Republican fear mongering is endemic to their talking points. It is not the political zealots that will rescue our state it will be the sensible moderates in both parties that will prevail. I have had enough of the sky is falling message. I want action on the serious problems our state has and I want it accomplished without a special session. At some point the left and the right will have to sit down, quit posturing, and get to work. The longer the brinkmanship takes the more likely we will see a special session because they are not focused on the work at hand.

Mohammad you must expand your list as to why some achieve a better outcome: luck, born into a family that promotes success, a good education, luck, mentors, supportive friends, luck..... I was one of the lucky ones, so through taxes and volunteering I can help someone who wasn't as lucky as me.