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What Dayton’s budget guru learned from Mike Tyson

Mike Tyson, right, landing a punch to the head of WBC heavyweight champion Frank
REUTERS/Steve Marcus
Myron Frans: "Tyson used to say that everybody has a plan until they get punched in the mouth."

Revenue Commissioner Myron Frans, the man responsible for helping to create the Dayton budget/tax proposal, is citing an unusual authority these days.

Frans is quoting former heavyweight boxing champion Mike Tyson.

“Tyson used to say that everybody has a plan until they get punched in the mouth,” Frans said Tuesday.

Frans made his comment after testifying before first the Senate and, then, the House tax committees, where he received some political punches.

The questions, mostly from Republicans, were not at all friendly.

In fact, one of the comments made during the Senate hearing by Julianne Ortman, R-Chanhassen, was considered so unfriendly that Gov. Mark Dayton responded a few hours later at a talk he gave to a meeting involving people with the Minnesota Credit Union Network at St. Paul’s RiverCentre.

“I can’t imagine why we would take sales tax dollars out of the pockets of middle-income and poor Minnesotans just to write a check to property owners in the state,” Ortman had said to Frans during the early-morning Senate Tax Committee meeting. “I don’t know why we would do that unless it looked like — forgive me for being cynical — a re-election plan.”

Counterpunching

Frans, who takes punches well, was calm, saying the $500 property tax rebate in the governor’s proposal is in direct response to complaints from Minnesotans about property taxes, which have increased by more than 80 percent in the last decade.

Dayton, who either was directly watching the hearing on television or heard about Ortmann’s comments shortly after they were uttered, was said to be very upset by the cynicism.

He dispatched a staff member to the area of the Capitol where reporters are hunkered down. The
reporters were told that Dayton would have a response to Ortman at the Credit Union event.

Reporters who did attend were expecting a gubernatorial explosion, but Dayton’s remarks seemed relatively mellow.

“If somebody has a better idea, step forward,” the governor said. “If people want to sit back and carp and deny people a $500 property tax rebate, they’re sure not in touch with people I hear from every day and talk to every day.”

Since Dayton made his budget/tax reform proposal, the administration has been taking blows from a wide variety of people.

But Tuesday, the tax committees got their first chances to get directly into the ring. Republicans came out swinging, though it was pointed out that the governor’s broad outline still hasn’t been turned into an official legislative bill.

DFLers mostly sat quietly by, while Republicans were swinging away, calling the governor’s proposal “job-killing” and “wage-cutting” and a “massive tax increase on the poorest of the poor” and a “massive tax increase on the job providers’’

‘Taxing sick puppies and kittens’

During the House committee hearing, Rep. Greg Davids, R-Preston, even expressed grave concern over the fact “that we’d be taxing sick puppies and kittens.”

You see, under the proposal, veterinarians would be required to charge a sales tax to kitten and puppy owners for services rendered. (It should be noted that owners of cows and pigs would not have to pay a sales tax on the vet services.)

Republicans pounded on the idea that the top 2 percent of income earners in the state, who would be taxed at a newly created fourth income tax tier under the plan, are “the job creators.”

Davids asked Frans what total percentage of the state income tax amount collected already comes from the top 2 percent.

Myron Frans
Office of the GovernorMyron Frans

Frans was unable to answer that question. But, citing a 2008 study, he did come at the question from a different context. The study showed total income earned in Minnesota in that year was $173 billion. Of that amount, the top 10 percent of the earners received 42 percent, or $73 billion. They paid 37 percent of the taxes, meaning the 90 percent paid a higher percentage of taxes.

Rep. John Lesch, DFL-St. Paul, did use the study to toss a few softballs to Frans about tax fairness. Lesch went so far as to suggest that if those who receive 42 percent of the income should pay 42 percent of the taxes if fairness is a goal.

“Change is difficult,” Lesch said at the end of his comments directed at GOP members of the panel. “But you learn in basic training, you have to do hard right instead of easy wrong.”

Mostly, though, Frans was taking punches. Typically, he smiled and suggested that if Republicans had a better plan to both solve the deficit and invest in education from pre-K through college, the governor was interested in listening.

Once in a while, though, a GOP comment would cut a little too deep and Frans would swing back.

Rep. Steve Drazkowski, R-Mazeppa, is one of those pols who can irritate DFLers simply by walking into a room.

“In your models,’’ Drazkowski asked Frans, “have you modeled for all those jobs that will be leaving? Did you model for a decrease in revenue?’’

Impact of tax increases?

“There is no credible evidence of people leaving a state because of tax increases,” Frans replied, adding that the lowest-taxed states tend to have the lowest standards of living.

Businesses, Frans said, are more concerned with an educated work force, a transportation system that works and government stability and predictability than tax rates.

Drazkowski didn’t seem to believe Frans.

After his testimony, Frans acknowledged that he and the governor had known that pushing this plan forward would be hard work. But they didn’t know there’d be such a steady flurry of punches to the mouth.

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Comments (12)

By Their Deeds

Considering that, under the leadership of former Gov. Tim Pawlenty, and their recent two-years stint in control of the legislature,...

our Republican friends did not perform a single deed that demonstrated their interesting in protecting, caring for, or spending government money to assist in the lives of and care for the poor and middle class, nor even for sick puppies and kittens,...

I can only take as COMPLETELY DISHONEST and MASSIVELY HYPOCRITICAL that they now protest that aspects of Gov. Dayton's budget proposal would have a negative effect on vulnerable people and animals.

We've heard their claims for years. We even elected them and gave them a shot at demonstrating the truth of such claims. But all we got from them when they had the chance were the same old, same old that they've always pursued,

strong efforts to punish and damage the poor and middle class while further enriching the rich (the "better business climate" boondoggle),...

and, of course an effort, through constitutional amendment, to make it much harder for the poor and the elderly to exercise their right to vote, and

an effort to ensure that couples whose loving, committed relationships they find "yucky" would never be allowed to legally solemnize those relationships as "marriages."

We've heard this entire Republican sales schtick for years. They've proven to us that it amounts to nothing but piles of waste material commonly produced by the large animals who inhabit farmer's feed lots.

We're NOT buying it. Even if they change their sales pitch, we're NOT buying it.

They don't need a new sales pitch. They need a product that will actually work effectively for the vast majority of the citizens of Minnesota (about whose legitimate needs they don't seem to have even the slightest clue).

evidence

I am quite sure you would find significant anecdotal evidence from Twin Cities business professionals (tax advisors, legal professionals, investment advisors, doctors) that would tell you many of their successful clients seriously consider or eventually do decide to make a residency change from MN because of the taxes. There is a tipping point. One of the many unintended consequences is that they take their philanthropy dollars with them when they leave.
What is more important than losing the actual physical presence of financially successful Minnesotans is losing their emotional presence. That is worth its weight in Walleye and Lady Slippers.

Anecdotes vs. Statistics

Anecdotal evidence is typically regarded as being unscientific, and the anecdotes themselves are often subject to various types of bias (confirmation bias, subjective bias, etc etc etc).
I would much rather we use concrete facts and statistics from peer-reviewed studies and trusted sources to make our decisions, rather than supposition, unfounded paranoia, and word-of-mouth.

It Simply Must Be True!

Because I really, really, really want it to be true.

But REALITY is on the other side (I know, that nasty old "liberal bias" that reality seems to have to "conservatives.") Where this has been studied, it has been found that tax increases generally have very little impact on hiring, nor do companies routinely move from higher tax to lower tax states.

In my experience the people who claim that high taxes have destroyed their businesses or prevented them from hiring staff (or who claim the other favorite Chamber of Commerce whipping boy, government regulations),...

were very poor business managers and never had a viable (or carefully and properly managed) business in the first place. Government was just their handy scapegoat for their own failures and lack of ability.

Indeed, if taxes and government regulation were such all-important considerations, Wisconsin's business growth would be off the charts while Minnesota would be dwindling, but, again, the REALITY is nothing like that.

"anecdotal evidence?"

Mr. Twain's line, probably quoted inaccurately since I'm working from memory, is something like, "There are lies, damned lies, and then there are statistics."

“Anecdotal evidence,” which hasn't even been provided, falls somewhere into yet another category, and may simply be wishful thinking. I don't dare comment on the value of the “emotional presence” of the wealthy…

Is there, in fact, any evidence that significant numbers of wealthy Minnesotans have taken up residence in another state because of Minnesota's tax structure? If so, since Republicans have been in charge most of the time I've been a Minnesota resident, there should have been a very sizable and unusual traffic jam on Minnesota interstates at the Wisconsin, Iowa and South Dakota borders when Mr. Dayton presented his budget proposal, as hordes of wealthy people fled the state, not to mention the backups on the MSP runways as the upper crust of even our top 2 percent fired up the private jets for a flight to whatever tax nirvana to which they'd decided to move.

Indeed, if large numbers of those wealthy enough to be philanthropers leave the state, there will be sad and important consequences, but I've not seen any evidence that the diaspora of this diaspora of the wealthy is taking place, or is even being considered.

Anecdotal evidence is not

Anecdotal evidence is not evidence.

jobs and taxes

Same old GOP BS about jobs and taxes. Suppose you are a small business owner with, say 15 employees and $5 million in annual sales. I step in with my magic wand and can grant you your choice of either A) a 10% decrease in taxes, or B) a 10% increase in sales. Which would you want? And in which case would you hire somebody? The answer appears to be A if you are a GOP politician trying to get business owners to donate for your next election. If the answer is B, you are probably a real businessperson who is thinking about growth and profitability for the business.

Jobs and taxes

The proposed tax on professional services will definitely have an impact on jobs. At our office we compete on projects all across the country. While we sell our services based on our qualifications, there is no denying that clients look at the bottom line cost when choosing who will get their business. If the proposed tax on professional services passes, our firm will be at a 5 percent disadvantage right out of the gate. To level the playing field, the work - and future job opportunities - will likely shift to other offices in the Midwest. The work on projects in Iowa, Missouri and other states that is currently performed in our Minnesota office will likely migrate to other offices in Wisconsin or Kansas City.

The Twin Cities is currently a regional center for professional services. Many of the lawyers, accountants, engineers, etc. working here are bringing revenue into the state from projects outside the state. If professional services here become subject to a 5 percent premium, you will see the growth in the Midwest professional service sector shift to Kansas City, Des Moines, Milwaukee, etc.

While we would not likely see shuttering of offices and a wholesale migration out of the state, job growth would definitely shift to more cost-effective locations.

Retread

Please see responses to Chelle's statement above.

I too have worked in professional services in a variety of organizations, one of which did business with companies across the US, and in Europe. Sure enough, we would have had to work that 5% into our own budgets, and adjust our prices accordingly. What would not have happened? Nobody in that company would have gotten up and moved to Milwaukee, Des Moines, or Kansas City, because they are not comparable cities, they don't have comparable services, and quite frankly, their populations cannot compete broadly against Minnesotans.

Now here's the rub: Dayton wants to CUT the corporate income tax rate WHILE raising that tax on services... so there already IS some give and take built into this proposal. I don't see why broadening the tax base, and lowering the rate, is such a bad idea on it's face.

people and taxes

I guess Minnesota nice is like ice. Slippery. Income taxes are the fairest. If you make more you pay more and if you sin--drink, smoke or gamble--you pay more. (Confession: I smoke, but am trying to quit. And have my gin and tonic every night.) And if you live in a good state like Minnesota you may pay more taxes but you get lots more for your money. Let's be honest, if not nice, and pay up when the state needs it. I'd rather have good schools, good roads, etc. and I know I can't buy them all by myself but I can pay my fair share.

We've tried the other way "IT DIDN'T WORK

It will cost me more but we've been there done that on everything the R's brought up. Let's bite the bullet. Pay up instead of running a tab.

any tax free enterprise

Has a pass on paying their share.