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‘Wisemen’ income tax proposal isn’t going anywhere

“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”?

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Comments (16)

  1. Submitted by Deb Reed on 07/08/2011 - 08:19 am.

    Tired of Republicans declaring, no taxing the rich. Middleclass and the poor being asked to support their life styles is ridiculous!
    They want to act like they speak for us… they do not! Time to get serious and cut spending where it is a non-necessary program and look at how many chiefs there are with too few indians!
    Programs for the needy are necessary, supporting our seniors should be required!!! High quality schooling absolute!! Time to fund certain programs on a every other year deal. Roads, parks, extra programs that are luxuries and NOT important to life every day!! If it is funded this year, next year gets a pass. I know even this is hard!! But our priorities should NOT include making corporations and the people that are suppose to govern us richer!!!!
    Health care even for everyone!!!

  2. Submitted by will lynott on 07/08/2011 - 08:45 am.

    Hm. I’m starting to agree with those whose advice is to ignore Politico. First off, it’s not the Mondale commission. It was and is Arne Carlson’s baby. Fritz lent his name, God knows why. Second, Politico’s allegation that the commission’s solution is to raise taxes ignores the actual 30-70 split between cuts (70%) and taxes (30%). Looks like partisan cherry picking.

  3. Submitted by Clayton Haapala on 07/08/2011 - 08:55 am.

    I’m with you, @will, on Politico’s lack of value.
    Dayton’s proposals have always included big cuts, as does the Arne/Fritz/et al commission’s proposal.

  4. Submitted by Jon Kingstad on 07/08/2011 - 09:03 am.

    It’s bad that the state’s credit rating has been downgraded. But let’s not forget that Fitch was one of the actors who played a part in creating the financial crisis that got us here.

    According to Wikipedia:
    “The Financial Crisis Inquiry Commission reported in January 2011 that: “The three credit rating agencies were key enablers of the financial meltdown. The mortgage-related securities at the heart of the crisis could not have been marketed and sold without their seal of approval. Investors relied on them, often blindly. In some cases, they were obligated to use them, or regulatory capital standards were hinged on them. This crisis could not have happened without the rating agencies. Their ratings helped the market soar and their downgrades through 2007 and 2008 wreaked havoc across markets and firms.””

    If one is a contrarian investor, this should be a signal to buy!

  5. Submitted by Jeff Michaels on 07/08/2011 - 09:09 am.

    There is nothing to prohibit those who support more government spending from making voluntary donations to the state of Minnesota. In fact, I am surprised Arne and Fritz have not made hefty donations already.

    Instead of asking those 7,700 millionaires to pay an additional $100,000 in taxes over a two-year period, a better solution would be to allow the over 900,000 people who voted for Mark Dayton to voluntarily contribute just $200 annually. That would also go a long way in solving the state’s money problem.

    Minnesota could then have a booming economy and liberals could still have the same number of people who are dependent on Big Government.

  6. Submitted by Paul Brandon on 07/08/2011 - 09:20 am.

    And let’s be accurate….
    The tax ‘increase’ is really a (partial) restoration of the tax structure as it was _before_ Republican tax cuts turned a budget surplus into a deficit; gutting the economy in the process.

  7. Submitted by Greg Kapphahn on 07/08/2011 - 10:21 am.

    Every day this shutdown lasts amounts to another open-pit-iron-ore-mine-sized shovel taken out of the hole the current crop of “conservative” Republicans is digging for their Party.

    The longer the shutdown lasts, the longer they keep digging, the more time it will take the Republican Party to climb out of what is rapidly becoming a bottomless pit.

    Indeed, if the moderates of the Republican Party finally decide to go to their precinct caucuses in sufficient numbers to elect new leadership (these “conservative” dysfons representing, at MOST, 30% of those who once called themselves Republicans),…

    Those “silent majority” moderates may just decide to leave the “conservatives” down there in the pit they dug for themselves, and let the hole fill with water as a monument to remind themselves that,…

    when the people crazy enough to be loud-mouthed and belligerent, sought to take things over by shouting everyone else down, they should have stood up to them in the first place. They should have rounded up their friends in sufficient numbers to vote them down in the next meeting. Then, if they still wouldn’t be reasonable, they should have had local law enforcement eject them.

    But, as much as I regret the pain that’s being inflicted all across the state, I sincerely hope that you keep on digging, Mr. Zellers, Ms. Koch, et al,…

    The longer and deeper you dig (by continuing to protect the fabulously wealthy and, thereby, making it clear that you don’t give a tinker’s you-know-what for anyone else), the more likely it is that the citizens of Minnesota will NEVER FORGET what you tried to do to us.

    Your political careers will be over, unless of course, you want to move to Mississippi or one of those other low tax Galt Gulch locations you seem so determined to create here (you know, where the rich people practically kill each other over who’s going to be in charge and over who has to pay for all the basic infrastructures needed to continue their prosperity when they all believe themselves to be too good to pay for them and no one else has any money).

  8. Submitted by Don Medal on 07/08/2011 - 11:31 am.

    Seems to me the big news here is the downgrade in credit rating, which is likely to slip more. Bonds in the future will cost more, for no reason other than that we couldn’t cooperate.

  9. Submitted by Lori Laflin on 07/08/2011 - 12:50 pm.

    Jeff #5 – I would have agreed to the extra $200, but I’m a State employee. The refusal by the GOP to negotiate has already cost me, my family, my co-workers, small businesses, and numerous others far more than that.

  10. Submitted by James Hamilton on 07/08/2011 - 12:52 pm.

    Re: the shutdown

  11. Submitted by Rachel Kahler on 07/08/2011 - 01:18 pm.

    Fine. I’ll pay 4% more, but why don’t we balance things and have the top 10% pay 6% more?

  12. Submitted by greg copeland on 07/08/2011 - 01:33 pm.

    Just when you might have thought The Fritz & Arne Show had been Cancelled, after it’s off-Broadway three day run was universally panned by the critics and Gov. Dayton; it has been scheduled for final recycling on Monday’s 11:00 AM Mid-Day Show on Minnesota Public Radio…is an HHH Policy Seminar next?

  13. Submitted by Ron Salzberger on 07/08/2011 - 02:11 pm.

    Another case of pundits reading other pundits, quoting them, and thinking that they’ve somehow read public opinion. Where’s the data or any sort of factual basis to the claim that the proposal “isn’t going anywhere?”

  14. Submitted by will lynott on 07/09/2011 - 02:26 pm.

    #5, there is nothing prohibiting those who prefer lower taxes and small government from moving to a low tax paradise, like, say, Mississippi, or perhaps Somalia.

    Once you and your kindred spirits are gone, getting taxation back to where it needs to be to make Minnesota exceptional again will be more straightforward. That would also go a long way in solving the state’s money problem.

    Minnesota could then have a booming economy like it used to have when the adults were running things, and conservatives would have their beliefs to keep them warm as the debris piles up in the streets in their more comfortable domicile.

    No need to thank me.

  15. Submitted by Sam Joseph on 07/09/2011 - 07:03 pm.

    The notion that raising taxes on the the top 1/2 of 1 percent of Minnesotans, those rare 7200 people who make $1 million or more is somewhat naive. Those are the most mobile Minnesotans. They already have homes in New York, Palm Beach, Naples, Scottsdale and/or Palm Springs. Most are NOT CEOs or trial lawyers, slaves to their high paying jobs. They are free to travel, free to live anywhere. Many are already retired, living off of huge pensions and investment accounts. If 3 percent of them decide “Screw it! Check please! I am out of here!”, then a a 2 percent increase will result in a $100 million DROP in tax revenues. So don’t fall for the simple solutions.

  16. Submitted by will lynott on 07/11/2011 - 04:04 pm.

    #15, the “rich flight” concept is a crackpot notion that has been debunked way too often to be taken seriously anymore. I know it sounds conforting, but there is not a shred of legitimate evidence for it–and a lot of evidence against it.

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