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‘Wisemen’ income tax proposal isn’t going anywhere

MORNING EDITION ALSO: Bachmann’s first Iowa TV ad; state’s bond rating downgrade; Pawlenty caught in shutdown politics; stadium tax rebellion; and more.
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“The Wisemen” promised a verdict on how to solve the budget mess by Friday, and they delivered a day early. Politico’s James Hohmann writes: “Surprising no one, the commission organized by Walter Mondale said Thursday that tax increases are the way to solve the Minnesota budget impasse that has shut down the state government for a week. Mondale’s bipartisan group of six took only two days to recommend a 4 percent, across-the-board income tax hike on all Minnesotans, an increase in the cigarette tax by $1.29 per pack and a boost in the alcohol tax. Over time, they also want fewer items to be exempt from the sales tax. But it seems unlikely to make things move. Democratic Gov. Mark Dayton, who campaigned last year on a ‘tax the rich’ mantra, quickly put out a statement disagreeing with the group’s call for an across-the-board income tax hike. … Republican Speaker of the House Kurt Zellers blasted the Mondale commission for taxing ‘Joe Six Pack’s six pack.’ ”

The Strib team of Rachel Stassen-Berger and Bob von Sternberg look at the proposal and write: “A bipartisan panel of political elders Thursday offered its own solution to Minnesota’s budget mess: Cut spending and raise taxes ‘for everyone’. … Former state Sen. Steve Dille, a Republican and co-chairman of the commission, said he suspected how those proposals would be received. He said he knew that higher taxes were “probably a non-starter. But I told Arne [Carlson] I’d give it a shot and try. ‘Not every Republican is at the far right end, saying no tax increases whatsoever. Some, including me, are looking to a more moderate approach,’ he said.” Call me crazy, but I say the GOP is more likely to go for taxing “Joe SixPack” than just the CEO of UnitedHealth.

A Strib editorial looks at the Mondale-Carlson proposal and says: “The Carlson-Mondale commission was right to take a dim view of another feature in Dayton’s offer, a $700 million delay in payments to school districts. That compounds the $1.4 billion IOU the state sent to schools in 2010 and has not repaid as promised. This ‘shift’ is in reality another one-time cut to the government service both parties say they want most to protect. But the tax increase that the bipartisan commission recommended in the school shift’s place was refused by Dayton on Thursday, and seems destined for rejection by the Legislature’s Republicans. It’s a three-year, 4 percent surcharge on every income tax bill. Thirty years ago, that was a smart and effective remedy for a spell of recurring budget crises. No longer. Given today’s political realities, a K-12 cut that can be dressed up as temporary has more dealmaking potential than a temporary tax increase.” More may need to be said about “today’s political realities.”

On The New York Time’s “Caucus” blog, Michael D. Shear notes Our Favorite Congresswoman’s first TV ad in Iowa and writes: “ Bachmann of Minnesota on Thursday released her first presidential television ad in Iowa, declaring that she will not vote to raise the nation’s debt ceiling. The ad comes as the debate is intensifying in Washington over how to reach a deal to increase the debt limit. Mrs. Bachmann’s ad makes clear she is hoping to appeal to Republicans who oppose any compromise.”

With visions of school aid shifts and tobacco bonds dancing in our heads … Kelly Nolan of the Wall Street Journal writes: “Fitch downgraded Minnesota’s bond rating one notch Thursday, taking away its triple-A rating, as the state finishes its first week of government shutdown over how to balance its budget. Until now, the shutdown has had little effect on Minnesota’s reputation in the municipal-bond market. The state’s 10-year debt trades in secondary markets at a yield around 2.8%, 0.04 percentage point above a scale of triple-A-rated states’ debt, said Dan Berger, senior market strategist at Thomson Reuters Municipal Market Data. … Fitch, in downgrading Minnesota’s rating Thursday, noted the state’s ‘reliance on non-recurring gap-closing measures over the course of the recession,’ as well as the recent budget stalemate. Even so, Minnesota’s revenue rose 12% in the first quarter, beating the national average increase of 9%, [investment executive Dan] Genter said. Minneapolis is growing, he added, and the state’s population is stable. His firm owns $15 million of Minnesota bonds. Even in normal times, Minnesota’s bond prices are generally stable because there are relatively few of them. The state has about $5.7 billion of general-obligation debt in the market, according to its Office of Management and Budget; that is a fraction of roughly $90 billion in California and $60 billion in New York, according to MMD data.” But … no … bonding bill … right?

Yvette Shields at The Bond Buyer writes: “Fitch Ratings stripped Minnesota of its coveted AAA rating Thursday, punishing the once flush state for political gridlock that has driven a reliance on one-time revenue gimmicks to balance recent budgets, and is also behind the current impasse over a $5 billion budget gap that has shut down state government. … ‘While negotiations continue, it is impossible to know at this point when a budget agreement will be reached or the shape that the final agreement will take. However, it appears likely that the outcome will continue the use of non-recurring balancing tools and that deferred payment obligations will continue to be a drag on the state’s finances,’ analysts wrote.”

The Wall Street Journal’s Kimberley A. Strassel files an opinion piece on T-Paw’s campaign vis a vis Minnesota Shutdown. She says: “Conservative critics jumped to suggest the shutdown shows Mr. Pawlenty is far from the fiscal hawk he claims to be — that he instead papered over Minnesota’s budget woes. Democrats piled on, with Walter Mondale emerging to lay the entire ‘mess’ of a shutdown at Mr. Pawlenty’s feet. All this is the last way Mr. Pawlenty wants to be defined to primary voters who are only now becoming familiar with candidates. … The candidate is eagerly talking about the current shutdown, contrasting Minnesota Democratic Gov. Mark Dayton’s calls for more spending (the immediate cause of the state’s deficit) with his own final budget fight with a Democratic legislature. He’s telling audiences that he refused Democratic spending demands and vetoed Democratic tax proposals. He’s highlighting his use of a little-used tool called ‘unallotment,’ which allowed him to unilaterally cut $736 million from the budget — much to Democratic fury.” Uh, Ms. Strassel, there’s just one problem with that “unallotment” move …  

Meanwhile … on stadium watch … St. Paul Mayor Chris Coleman is getting tough. He sent out a form letter, by god, to other Ramsey County mayors. Frederick Melo and Sarah Horner of the PiPress report: “Coleman on Wednesday emailed a “call to action” to more than 30 city officials from Arden Hills, Shoreview, Lauderdale, North St. Paul, Maplewood and other Ramsey County communities, asking them to write letters of opposition to the governor’s office, county commissioners and state lawmakers. The email includes a suggested form letter to the governor’s office, as well as a sample resolution, similar to the one approved Wednesday by the St. Paul City Council opposing the proposed sales tax. ‘While the Vikings may be a statewide asset, the residents and businesses of just one county should not solely bear the burden of financing their new facility,’ Coleman’s letter states. ‘The City of [CITY] continues to face many challenges similar to that of the State of Minnesota. Revenue continues to decrease as costs continue to rise. The mortgage foreclosure crisis is not over, and unemployment remains high. Adding a half-cent sales tax to businesses and residents to fund a statewide asset is unfair and inequitable.’ ” There was a brief Council meeting over the matter. “Not every member of the public agrees. Dave Garza, 40, of St. Paul left the council meeting disappointed. ‘When we win that Super Bowl, it will be a benefit to everybody,’ said Garza, who sports a large Vikings tattoo on his belly and an American flag on his back.” Sign that guy up for a luxury suite.

The out-of-town editorial of the day is from Jerome Christenson at the LaCrosse Tribune: “It used to be we made fun of Iowa’s highways and Wisconsin’s state cowpaths. We don’t do that anymore — especially those of us who drive on U.S. Hwy. 14 or bounce along the part of Interstate 90 the stimulus money didn’t fix. It used to be Minnesota had schools where a kid, no matter how much his folks made or didn’t make, had plenty of opportunities to participate in sports, music, speech, drama and a whole student handbook full of activities. And, except for a guy buying his own jock, no kid had to pony up a nickel in fees or other charges. They were public schools, after all. It used to be we had state colleges, universities and technical schools where any kid with the smarts and drive to get in and stay in would come out with a top-flight education regardless of what her and her parents’ balance sheet looked like. And when she picked up that diploma, it didn’t come mortgaged to the hilt with a student-loan debt that would keep her living in Mom and Dad’s basement until she was 30. … it used to be that Minnesota was full of people willing to pay for that nice stuff. Back in Mr. Welper’s civics class, we were were taught that ‘making personal sacrifices for the common good’ was the hallmark of good citizenship.” Fine, fine. But what did Mr. Welper have to say about “winning”?