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Scott Jensen’s tax plan is bad for Minnesota; would unfairly burden lower income individuals

Repealing or phasing out the income tax would have catastrophic effects.

Scott Jensen
Scott Jensen
MinnPost photo by Peter Callaghan

Of all the ill-conceived ideas advanced in this year’s political campaign, few are worse than Republican gubernatorial candidate Scott Jensen’s proposal to phase out Minnesota’s personal income tax.

Jensen’s proposal would destabilize the state’s tax structure, make it more regressive (meaning that lower income taxpayers would shoulder more of the tax burden) and dramatically reduce resources available to fund vital state services.

The income tax is part of a three-legged stool – along with the sales and property taxes – that supports most state and local services. It is the most progressive of the three taxes, and this balanced tax structure helps our state ride out the ups and downs of the global economy.

Repealing or phasing out the income tax would have catastrophic effects. Revenues from this tax cover 53% of the state’s general fund budget. Replacing even a portion of this revenue would be nearly impossible, barring draconian cuts in public services.

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Joel Michael, a retired tax policy expert who worked for the nonpartisan House Research Department for more than four decades, estimates that replacing 45% of the lost income tax revenue through a sales tax increase would require raising the tax rate from the current 6.875% to about 14%.

And spending cuts are unlikely to help fill the revenue void. As Michael points out, “Even in austere times, the Legislature rarely cuts spending.  It simply slows down or stops the rate of increase.” Much of the state’s spending is locked in place to provide state matching funds for federal social programs, or to keep state commitments to local governments.

About 40% of the state budget goes just to help fund K-12 education. If enacted, Jensen’s proposal would likely shift the burden from the state to property tax payers in each of the state’s 329 school districts. For many homeowners, it would mean dramatic increases in their property taxes.

Jensen’s proposal would effectively reverse the so-called “Minnesota Miracle” enacted in 1971 under DFL Gov. Wendell Anderson. That law dramatically increased taxes at the state level in order to reduce school districts’ dependence on the property tax and help reduce disparities in per-pupil spending among districts, rich and poor.

Talk about turning back the clock.

Moreover, do we really want Minnesota to be more like South Dakota, one of the seven states without an income tax?

Steven Dornfeld
Steven Dornfeld
Every two years, the business-oriented Minnesota Center for Fiscal Excellence studies and ranks state spending for various purposes, using population and other factors. In its most recent study, South Dakota ranked 30th among all states in K-12 spending per pupil, compared with 15th for Minnesota. It ranked 24th among all states in spending for higher education, 42nd in spending for public welfare and dead last in spending for roads.

Michaels says fiscal reality is why the Jensen campaign is unlikely to release the details of how he would eliminate the income tax – or even attempt a major reduction. “The details would be ugly politically,” he says.

I will agree with Jensen on one point:  DFL Gov. Tim Walz’s proposal to send taxpayers a one-time tax rebate is a transparent election-year gimmick. It is all too reminiscent of Gov. Jesse Ventura and his “Jesse checks.” It would be much wiser to target this tax relief to people who need it most or use it for one-time investments.

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Jensen’s father Carl Jensen, a lawyer from Sleepy Eye, served in the Legislature for nearly three decades. I covered the Legislature during part of that time and found Carl to be a thoughtful, progressive and independent-minded conservative. In 1986, he attempted a political comeback, running as a DFLer.

I can’t believe Carl would be pleased by some of the policy proposals and political rhetoric coming from his son.

Sons are not obligated to embrace all of the positions taken by their father (as I’m sure my own sons will be relieved to hear). But the ideological change from the elder Jensen to his son reflects just how far Minnesota’s Republican Party has veered to the right.

Steven Dornfeld, a retired journalist, wrote about state government and fiscal policy for the St. Paul Pioneer Press and the Minneapolis Tribune for more than three decades.

Editor’s note: This commentary has been updated to correct that South Dakota lacks an income tax rather than sales tax.