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For Gov. Dayton, tax reform, stadium controversies make March 'cruelest month'

dayton portrait
MinnPost photo by James Nord
Dayton took some heavy political hits in March.

Few Minnesotans will mourn the passing of this March. But it’s likely that no one will be as happy to see the month fade away as Gov. Mark Dayton.

With the exception of the government shutdown in his first year in office, this appears to have been Dayton’s roughest month in office.

Between giving up — without getting anything in return — his “big idea” of expanding sales taxes to services and the tepid performances of the gaming devices that were to fund the public portion of the Vikings stadium,  Dayton took some heavy hits.

Even the firing of  University of Minnesota basketball coach Tubby Smith could cause him some headaches.

The governor, after all, wants to increase spending to the University, and even though Smith’s $2.5 million buyout will not come from its general fund, there are legislators who see the Smith deal as an example of March Madness at the U, where the athletic department seems to throw around contract extensions and buyouts with little regard to political implications.

Stadium issue returns

The stadium, in particular, could be the sort of political albatross that lingers into the next election. The huge subsidy never was popular with the majority of Minnesotans.

And now it appears that the governor’s administration was guilty of ignoring reality and looking at the financing package through rose-colored glasses.

Beyond that, it now appears that Dayton, the leading supporter of the stadium, was in the dark about the fact that optimistic revenue projections were coming from the gambling industry, which stands to profit from laws expanding gaming in the state.

Dayton says it’s still too early to declare the electronic pull-tabs — and now electronic bingo — a bust as the funding source.  The games are still new and available in only a few locations, and the bonds haven’t even been released yet.

But, at a news conference Tuesday, he tried to make the point that he’s not in this alone.

“We’re all in this together,’’ Dayton said, pointing to a Legislature that was controlled by Republicans when the funding bill was passed. “It’s not about pointing fingers about what happened last spring.’’

The reality, however, is that if revenues from e-games continue to fall far short of projections, most fingers will be pointed at the governor.

Tax reform surrender

The surrender on the bigger issue — lowering the sales tax and broadening the base to include services — is likely more of an insider problem than a lingering issue with the public.

What will be remembered by insiders, and some in the business community, is how Dayton didn’t do his homework before pushing a fundamental change in Minnesota tax structure.

Yes, his revenue commissioner, Myron Frans, spent months touring the state with an unbalanced  three-legged stool touting the need to rebalance the state's financial streams by expanding the sales tax to services. Frans attracted strong and encouraging turnouts in his travels.

But after Dayton unveiled his big idea, it quickly became apparent that neither legislative leaders nor large business groups were even close to being on board with the plan.

“It never had a chance in the House’’ is how Rep. Ann Lenczewski, DFL-Bloomington, put it.

Lenczewski, a moderate DFLer who is head of the House Taxes Committee, is not afraid of tax reform. But, she said, Dayton’s timing could not have been worse.

For starters, she said, reform must come at a time when the state “has a pile of money.”

When the state is operating with a surplus, reform diminishes the sense of "winners and losers."

Redistricting a factor

Beyond that, Lenczewski said, it’s impossible to try to take on tax reform in a year in which the state has gone through redistricting. Redistricting creates large freshmen classes in the Legislature.

Tax policy is hugely complex, and it takes years for most legislators to get a grasp of the intricacies of taxes.  The last thing a body of rookie legislators can dive into is tax reform.

Finally, she said, DFL legislators did not run on the issue of tax reform. Therefore, it would have been very difficult to make it the cornerstone of this session.

No wonder then that when Dayton unveiled his “big idea" for reforming taxes,  DFL leaders in both the House and Senate hemmed and hawed.

And no wonder that the governor couldn’t even receive something in exchange for giving up on reform.

There are some at the Capitol who believed Dayton could have pushed harder.

A  labor lobbyist, who asked not to be named,  said that Dayton “should have paved the way by hitting hard on the idea that just because a group of people have received a free ride [with sales tax exemptions] for 46 years doesn’t mean they’re entitled to it forever."

But instead of taking that populist approach, he said, Dayton allowed the roars of business to quickly take over the debate.

Another lobbyist, who asked not to be named, was far more empathetic toward Dayton’s dropping of the reform. The lobbyist, who formerly served in state government,  said that he believes Dayton changed his mind after conversations with business people he knows and respects.

It also should be noted that within a few hours of Dayton unveiling his tax reform plan, many Republican legislators were saying it had no chance.

"DBA — Dead before arrival" was how former House Majority Leader Matt Dean, R-Dellwood, put it in a recent conversation.

Dayton likely to win on tax increase

At the same time, though, many of those same Republicans were saying Dayton would win his fourth-tier income tax on Minnesota’s wealthiest.

In that sense,  by proposing the sales tax changes that created so much of an uproar, Dayton helped smooth the way for winning his "tax-the-rich" campaign pledge.

That’s no small victory — and it plays well with the 98 percent who will see no income tax increase.

April and May likely will be somewhat smoother sailing for the governor than March has been, although there are never sure things in politics.

It’s already obvious that a final budget deal among Dayton and House and Senate DFLers will be a little messy. There will be some closed-door meetings among legislative leaders and Dayton to resolve budget issues, but there certainly will be no threats of a shutdown.

Still,  closed-door meetings will be needed “to work on details,’’ predicted House Speaker Paul Thissen.

Unlike when the GOP held the majorities in the House and Senate, there appears to be little effort being made between DFL leaders to work in lockstep.

“Our budgets are not aligned,’’ said Sen. Dick Cohen, DFL-St. Paul, who heads the Senate Finance Committee. “But if you look at the targets, we’re in the same ballpark. We’re not in lockstep, but the resolutions will be fairly simple.’’

DFL leaders hope to diminish cries of “foul’’ that always arise with closed-door meetings by keeping all conference committee sessions open to the public.

Those leaders hope to devote April to the budget and,  likely, bonding. That will leave May for such volatile issues as guns and gay marriage.

But for the governor, the rest of the session promises to be less volatile than March has been, although the Vikings stadium issue always seems to linger in the shadows.

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Comments (8)

Dayton was warned

I know Dayton was warned, as were the legislators, because I warned them. I have the e-mails to prove it. I even hand delivered an economic analysis to Dayton's office. I'm beginning to suspect I was ignored. Imagine that.

I was talking to my elected representatives back before the election and they talked about the strategic decision they made to support the stadium despite it's obvious stupidity. I told them at the time it would come back to haunt them and wished them luck. I guess they're gonna need it.

The stadium was the signature achievement of that legislative session. How sad is that?

Alida...we need your checkbook!

Don't worry...The Governor has another secret revenue source.

Stumbling and bumbling

Dayton's "tax-the-rich" schemes will be more of a failure than his e-pull tabs projections and will actually decrease overall income tax revenue. The wealthy have more control of their income than the rest of us and can easily choose where the want to live and pay taxes.

This is not true.

This myth has been repeatedly studied and shown to be false. Not to mention it doesn't even pass basic common sense. How many people would uproot their entire lives - and presumably their businesses, since, as we're frequently reminded, the wealthy are business-owners - over a few percent tax increase? Only the most ardent capitalist would presume to think human decision making processes are so incredibly simple.

The Stadium

Few things in recent MN history are as disappointing as the new Vikings Stadium decision. The stadium would not have passed with a referendum so the majority of our elected reps decided to use legal trickery to get it through. There have been many well written articles about the NFL's poor future outlook due to concussion litigation and diminishing demographic interest. It is a bad time to build a stadium for tax payers and it is going to hurt us in the near future.

Whine, whine

Wow, what a bunch of quitters. The economy isn't perfect right now. The legislators are too new. Leglisators that squabble over petty details because they insist on putting the immediate self-interest of their district not only above, but way, way above the good of the state as a whole. Continual arguments that any any tiny imperfection in a new system doesn't make it way better than the messed up one we have. It's always something. It's pretty clear why nothing gets done anymore. The only time they're going to pass meaningful tax reform is when the DFL controls everything, since the GOP has no good-faith interest to speak of, and that time is now. Who knows when it will happen again. Props to Dayton for at least trying, rather than deciding it would be too hard in advance.

Stadium Funding

I would gladly open the stadium debate backup...it was not a public good when they passed it, but it is probably too late.

Buyer remorse.. I wonder

Buyer remorse.. I wonder whether Margaret Anderson Kelliher or RT Rybak have any plans for 2014?