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Senate GOP letter offers the latest evidence of how hard a Minnesota budget compromise might be

A letter to Gov. Mark Dayton from the Republican Senate caucus seems to have made more remote the possibility of compromise on how to solve the state’s budget deficit.

The letter (PDF) — delivered to the governor Thursday — affirmed the position that Senate Republicans will not accept ANY form of tax increase to cut into the $6.2 billion budget.

“We write to make perfectly clear, however that we are all opposed to raising taxes to balance the 2012-2013 $6.2 billion deficit. We all are opposed to your budget that increases state spending …”

Sen. Tom Bakk
Sen. Tom Bakk

“It sounds like a no-new taxes pledge,”said Senate Minority Leader Tom Bakk.

Indeed it does.

So where’s the compromise in that?

“Within a $32 billion budget, we’re absolutely willing to compromise,” said Senate Majority Leader Amy Koch this morning at the GOP’s weekly wrap-up press briefing.

Dayton’s budget, of course, called for $37 billion in spending and tax increases on the wealthiest.

Sen. Amy Koch
Sen. Amy Koch

New economic forecast imminent
So here we are, two months into the session with three months to go and — with one exception — nothing seems to have changed.

The exception comes on Monday when a new economic forecast for the state will be released. Most expect a rosier revenue projection.

 Republican House members even have a pool on how much rosier the outlook will be. Expectations for the forecast seeming to be counting on an increase in state revenues of anywhere from $256 million to $612 million.

Of course, even those optimistic numbers are just a chip out of the deficit boulder.

At a point in the session where one might have expected at least a rhetoric ceasefire, the Senate letter sounded like something from a campaign brochure.

It should be noted that House Republican leaders didn’t fire off a similar letter.

“It didn’t seem important,” said Rep. Mary Liz Holberg, who heads the House Ways and Means Committee. “I’m not sure what’s up with the Senate.”

What is up?

“I don’t think the letter said anything that we haven’t been saying all along,” Koch said. “We wanted to make it clear, once again, that tax increases are not an option.”

 Dueling ‘mandates’
Koch also said that the letter merely affirms the mandate she believes Republicans received from voters when they swept into control of the Legislature in November.

That suggestion of “mandate” irritated Bakk.  He noted that Dayton won statewide election.

“We have a mandate,” too, Bakk said, “but Mark Dayton doesn’t go around pounding on his chest.”

In fact, at the moment Dayton released his budget, he said he understood that along the way there would be compromise.

Bakk suggested that the Senate letter might have been a way to force Republicans who might have been taking even tentative steps away from a no-new-taxes position back into the fundamental party line.

“Irresponsible,” said Bakk of the letter. (He also fired off his own letter on the subject.)

But it certainly got everyone’s attention at the Capitol back squarely on the budget.

Senate Republicans said they plan to call for a floor vote on Dayton’s tax increases by late next week.

Just how they will do that is a mystery.

Bakk pointed out that under the state Constitution, finance bills come from the House. At this point, House leaders have shown no inclination to take up the Dayton tax proposals in the next week.

Republicans in the Senate could attempt to attach Dayton’s tax proposals as an amendment to some other bill dealing with finances.

To have a vote on the Dayton tax plan would be strictly for show. Clearly, Republicans would vote the Dayton plan down.

But Republicans believe, probably correctly, that not even all DFLers would support Dayton’s plan.

Political game-playing
This political game-playing does work both ways.

House Minority Leader Paul Thissen, for example, said that rather than writing letters, the Republican leadership should get to the business of showing Minnesota what its $32 billion budget would look like.

“The majority has been sitting on the sideline,” Thissen said. “It’s time for them to get in the game. If they think $32 billion is enough, they could have gotten that done months ago.”

It is Thissen’s belief that once Minnesotans see what sort of cuts a $32 billion budget would contain, they will rise up in opposition to a cuts-only budget.

It should be noted, that Koch and Sen. Geoff Michel were doing their best not to make the Republican no-new-taxes issue personal.  Michel said the Republican leaders have “enjoyed” their meetings with the governor and that communications have been open.  

Three almost-major bills — alternative teacher licensure, lifting the ban on construction of nuclear power plants and a bill streamlining the permitting process for business construction — may be headed to Dayton’s desk this week. Republican leaders have worked with Dayton on those bills and, Michel said, they have hopes Dayton will sign all three.

But, Michel added, “the window is closing” on all issues other than the budget.

As the window closes, the Capitol is heating up.

Doug Grow writes about public affairs, state politics and other topics. He can be reached at dgrow [at] minnpost [dot] com.

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Comments (27)

  1. Submitted by Howard Miller on 02/25/2011 - 02:21 pm.

    If our purpose in Minnesota is to achieve the quality of life “enjoyed” by Mississippi citizens, then the Republicans in our Senate are on the right path. I still hold greater hopes for our once-leading state

  2. Submitted by Hiram Foster on 02/25/2011 - 02:42 pm.

    Instead of talking and spinning about the deficit, the Republicans should actually do or at least propose doing something about it. The campaign has been over for months now.

  3. Submitted by Neal Rovick on 02/25/2011 - 02:55 pm.

    Dear Republicans;

    We got it, you want a $32 billion budget.

    Well, where is it?

    By the way, where are “jobs, jobs, jobs”?

    Sincerely,

    Still Waiting

  4. Submitted by Hillary Drake on 02/25/2011 - 03:32 pm.

    If they go to a special session because they didn’t take up the budget in a timely fashion, can we (as citizens of the state) not pay them?

    The thing about being in the majority is you have to produce.

  5. Submitted by Eric Ferguson on 02/25/2011 - 03:50 pm.

    SO they’re writing no-compromise letters to the governor instead of working on their own budget proposal. They have the governor’s budge already. Are they confused by the round bouncy thing in their court?

  6. Submitted by Ron Gotzman on 02/25/2011 - 07:43 pm.

    Republicans, please hold firm. We already know if we tax and spend, it will never be enough to satisfy the DFL special interests.

    Maybe we will have an “Obama summer of recovery” this year.

  7. Submitted by Tom Christensen on 02/26/2011 - 07:53 am.

    Political zealots will do absolutely nothing for our state, only themselves. Just like your life a balanced approach to the budget is the only cure for the states financial and job crisis. The Republicans keep talking about the fraud and abuse in the system. You don’t get fraud and abuse out of the system with a meat cleaver. I hope our crisis will teach the politicians playing games with Minnesota’s finances is a risky business as Pawlenty has so aptly shown us. The Republicans seem to be working on everything but jobs. Where are the jobs they promised? I’ll bet that the politicians will waste so much time that there is no way they can get their work done without a special session. It is a good thing they are politicians because they would not get away with being this nonproductive in the world the rest of us live in.

  8. Submitted by Hiram Foster on 02/26/2011 - 08:32 am.

    “Republicans, please hold firm. We already know if we tax and spend, it will never be enough to satisfy the DFL special interests.”

    And we will never be able to cut taxes enough to please Republicans. I don’t think it’s the object of the exercise to satisfy either Democrats or Republicans, and I find it impossible to envision any scenario. Interests, including those very special I call my own, are never satisfied nor should they be.

  9. Submitted by Greg Kapphahn on 02/26/2011 - 08:58 am.

    The Republicans DO have a mandate: that mandate is to produce what they promised to produce in their ads: Jobs! Jobs! Jobs!

    Nowhere in their advertising, although perhaps buried in the “smaller government” (Pavlovian interpretation: “cheaper”) fine print of their flyers, did they say

    Cut jobs! Cut jobs! Cut jobs!

    But cutting jobs is exactly what a “cuts only, smaller government” budget will do.

    Layoffs of public employees, of teachers, nurses, clerical workers, public safety personnel, and others at EVERY LEVEL are JOB CUTS and will have the same depressive effect on local economies as private sector layoffs.

    Such job cuts WILL HURT BUSINESS, especially local mainstreet businesses.

    Why would the Senate Republicans write this letter to the governor? Because they’re doing what “conservatives” so often do – projecting the problems within themselves that they can’t deal with and won’t even acknowledge outward and blaming someone else for those problems.

    Along with homophobia and islamophobia (and a host of others), I suspect what we’re now seeing is that the Republican leadership in the Minnesota senate has developed budgetophobia.

    Consequently, they will NEVER produce a budget of their own. They are in total denial about their responsibility and failure to do so. In their minds and tortured psyches, the ONLY PROBLEM they face is Governor Dayton’s refusal to do things their way – to produce that “cuts only” budget FOR them.

    Just as with so many other things among “conservatives” and their supporters, their problems are always someone ELSE’S fault (and never, ever, their own)…

    Will anyone EVER puncture their denial over the fact that former Governor Pawlenty, with their completely united, loyal support, put them in this impossible position, then skipped town and left them holding the bag?

    Under these circumstances, I suspect we never will see a budget from the Republicans. What we’ll see, instead, is Republicans ratcheting up their attacks on Governor Dayton, their increasingly shrill, hysterical blaming of him for their own failures, and the media playing along and feeling sorry for those poor, beset upon Republicans who are unjustly suffering because Gov. Dayton is being too mean to them and not doing things their way.

    On the idea of state tax cuts for the wealthy, there is a certain class of individuals who have their own phobia expressed in anger and resentment that the government (or anyone else, for that matter) should try to tell them what to do, whether that “telling” is speed limit laws, environmental and safety regulations, or requirements to pay taxes.

    These folks would detest government and taxes even if they were paying $5/year in total taxes and fees. If we try to cut the government in order to satisfy them, they will NEVER think we’ve cut enough. They will always demand more cuts, even as they show up at state and local meetings demanding more services for themselves and their families. Somehow their brains are incapable of computing the simple truth of “you get what you pay for.”

    The position our Republican friends have put themselves in is the same one that a retailer who promises amazingly cheap prices faces when the public after shopping at their “cheap goods” store, discovers that everything they buy, there, immediately breaks, falls apart, or never works right in the first place.

    You can get a lot of people to come to your grand opening sale, but a few months down the road, you’re likely to find no one’s buying what you were selling anymore.

    The Republican response to the situation they created for themselves is to try to claim “It’s not our fault!” while trying not to reveal that what they were really selling in place of Jobs! Jobs! Jobs! was a state where, although their richest friends get a lot richer, everything will soon be broken, falling apart, or not working right, if it works at all.

  10. Submitted by Alec Timmerman on 02/26/2011 - 10:14 am.

    Ron,

    To be a great society you must educate, innovate, and build. It sets us up for the future and attracts business. A state that educates, innovates, and builds is much more attractive to business and jobs than just a low tax state. Look at Nevada or Michigan with their ultra low taxes. The don’t educate, innovate, and build like we do. Now you guys want to give up what made Minnesota great, and just be a 2nd rate Mississippi. We have a chance to support 21st century research at the U, building infrastructure, and improving education.

    You are happy to see our infrastructure still crumbling, the U operating in obsolete buildings, and de-fund education. That’s not how to remain great. Ask any private corporation. Educate, innovate, and build.

  11. Submitted by Bernice Vetsch on 02/26/2011 - 11:30 am.

    Are all of Minnesota’s Republicans ignoring the assault on workers and on the very meat of good governance being carried out by the governor of Wisconsin? There must be plenty of moderates out there who are outraged by a governor who:

    (1) seeks to trump the National Labor Relations Act of 1935 by refusing to negotiate with the state’s union and to help people like the Koch Brothers reach the eventual corporatist goal of no unions anywhere;

    (2) to manage all state agencies himself –Medicare/Medicaid, Wisconsin’s healthcare plan for the poor, the public utilities commission — and everything else (his right-wing legislature has already given him this power). Look for massive cuts in service;

    (3) and to sell off the state-owned utilities that now provide power to Wisconites at moderate cost to ANY private company he chooses at ANY price that company wants to pay without ANY oversight (his right-wing legislature has already given him this power as well). Koch Industries comes to mind here as a probable beneficiary.

    These are monstrous attacks by a governor who campaigned on “jobs jobs jobs,” but has only worked to assure the opposite.

    I hope that moderate Republicans will refuse to tolerate that “Walker attitude” in Minnesota unless they want to watch our state fall apart.

  12. Submitted by David LaPorte on 02/26/2011 - 11:35 am.

    Enough with the “holding firm”, Republicans. Please DO something. Like submit your own budget.

    The time for sound bites is over. It’s time to govern, not campaign.

  13. Submitted by will lynott on 02/26/2011 - 01:44 pm.

    “But Republicans believe, probably correctly, that not even all DFLers would support Dayton’s plan.”–Doug Grow.

    Doug, where do you get this? You’ve been teasing us with statements like this for a long time. Please come across with the names and quotes. If there are Dems you are not going to back the Governor on this, I want to know who they are.

  14. Submitted by Tim Milner on 02/26/2011 - 07:30 pm.

    The question that I have, one that is never answered, is just how much is fair?

    My wife and I already pay the highest federal (35%) and state (7.85%) rates. We both pay SS (6.2%) and Medicare tax (1.45%. $6,000 in homestead tax.

    I own a small manufacturing business that is capital equipment intensive. As a sub S corp, I get the benefit of paying our profit as personal income, rather than as corporate income. I also get the undesired benefit of having most of my equipment depreciation eliminated through AMT. Meaning that, even in years like 2009 when the business had real, not paper, losses because I choose not to downsize, I still paid taxes based on AMT rates.

    I could go on about all the other taxes and fees that I pay as a small business owner. But to summarize, I estimate that ~61% of my family income last year went to taxes.

    But based on our gross income, it seems that people feel we don’t pay a fair share. So, would some please tell me – what is my fair share? 65%? 70%? More than that?

    I don’t want this to be seen as a “whine”. The amount I am paying is, OK, i guess, though the AMT thing really can be frustrating.

    We are fortunate – my wife and I are college graduates, good jobs, paying for our kids college, saving for retirement, etc. But we certainly don’t feel overly wealthy and certainly don’t live a lavish lifestyle.

    Still, I really would like some to tell me exactly what % of our income our fair share should be?

  15. Submitted by Rich Diedrich on 02/27/2011 - 08:56 am.

    “My wife and I already pay the highest federal (35%) and state (7.85%) rates. We both pay SS (6.2%) and Medicare tax (1.45%. $6,000 in homestead tax.”

    I am trying to understand this calculation. The top marginal tax rates are not your total effective rates. In addition, the top federal marginal rates only apply to income above the SS limits.

  16. Submitted by Dave Kopesky on 02/27/2011 - 12:02 pm.

    “House Minority Leader Paul Thissen, for example, said that rather than writing letters, the Republican leadership should get to the business of showing Minnesota what its $32 billion budget would look like.”

    AMEN

  17. Submitted by Hiram Foster on 02/27/2011 - 01:06 pm.

    As someone who is in the 35% tax bracket, your income is in excess of $373,650 a year. You may not feel wealthy, but you are doing very well in this economy. Many others are not.

    You have organized as a Sub chapter S corporation for some of the tax advantages such organization provides, but given the nature of your business you might consider reorganizing as a regular corporation so that you can take advantage of the depreciation. Among other things, the fact that you are in such a high tax bracket adds to the value of the deductions.

  18. Submitted by Greg Kapphahn on 02/27/2011 - 01:12 pm.

    If a non-incorporated SubS business has actual losses, it should be paying NO income taxes whatsoever, tax liabilities being figured on profits only. Also, if this is, indeed, the case, I believe “income averaging” could be used together with amended returns for allowable previous years to reduce previous tax liabilities and receive refunds.

    Moral of the story, if you have actual losses and still paid ~61% of your total net income in personal income taxes, you need a more capable person to prepare your returns.

    But I suspect what you’re actually doing is paying yourself a substantial salary, then claiming losses for your business based on the substantial salary you’re paying yourself, while in your post, not specifying which taxes are costing you so much (perhaps including all forms of taxes, including the withholding you may have had to pay for your employees as part of your own personal tax liability).

    This is disingenuous, to say the least, since if your business, itself actually lost money, you should not have been able to pay yourself any salary at all, let alone a salary high enough to require “~66%” total personal tax liabilities.

  19. Submitted by will lynott on 02/27/2011 - 01:54 pm.

    Ooops,#13 should read “If there are Dems WHO are not going to back the Governor on this, I want to know who they are.” Still waiting, Doug.

  20. Submitted by Hiram Foster on 02/27/2011 - 03:21 pm.

    Some interesting analysis here, much of which supports my theory that many Republicans suffer less from high tax rates than poor tax planning.

  21. Submitted by Hiram Foster on 02/27/2011 - 03:54 pm.

    “But Republicans believe, probably correctly, that not even all DFLers would support Dayton’s plan.”

    It is hardly imaginable that there are any Democrats who support Gov. Dayton’s plan as is, just as there were very few Republicans who supported Gov. Pawlenty’s budgets when the situation was reversed in the last session. But if Republicans believe that there is enough potential support on the DFL side to allow them to pass an all cuts budget over a Dayton veto, they are, in all likelihood, mistaken.

    We have an interesting negotiation dynamic. On the one side, we have a party willing to negotiate and compromise. On the other side, we have a party ideologically and morally committed to a policy of no compromise. What will be the result?

  22. Submitted by Tim Milner on 02/27/2011 - 04:30 pm.

    I appreciate all the responses. 3 points.

    1 – The salary I draw from the business is well under six figures. Well under. In fact, I was outpaced by several employees based on their total pay (with overtime) I have yet to take a dividend for anything but tax payments. What I have done is consistently re-invested in my plant and equipment while paying competitive wages with excellent benefits. If the state needs more, I will still re-invest – but to a lower degree, as there is only so much cash generated each year.

    2 – The accounting firm I use actually very competent. I think it goes to show just how complicated the tax codes has become – especially for small businesses. It can lead to effective tax rates far different (both higher and lower) from the rates actually contained within the tax code.

    3 – But no one responding has answered the basic question – what percentage of my income is paying my fair share in taxes?

  23. Submitted by Loren Cramer on 02/27/2011 - 04:59 pm.

    Who Are The Puppeteers? I must remind Minnesotans and all freedom loving American’s that 10 year Congressman Charles Lindbergh Sr. Who once opposed World War 1 and ran for Governor on the Minnesota Farmer-Labor party ticket once said, “This [Federal Reserve] establishes the most gigantic trust on earth. When the President, (Woodrow Wilson) signs this bill, the invisible government of the monetary power will be legalized…the worst legislative crime of the ages is perpetrated by this banking and currency bill.”

  24. Submitted by Hiram Foster on 02/28/2011 - 06:23 am.

    “The salary I draw from the business is well under six figures. Well under. In fact, I was outpaced by several employees based on their total pay (with overtime) I have yet to take a dividend for anything but tax payments.”

    Then how could you be in the highest tax bracket?

  25. Submitted by Hiram Foster on 02/28/2011 - 06:33 am.

    “what percentage of my income is paying my fair share in taxes?”

    There really isn’t a good or easy answer to that question. Your tax situation is complicated in ways that work to both your benefit and to your disadvantage. You have Subchapter S status, a tax break for you, but it costs you in other ways. You re-invest in your business and that can be a huge tax advantage since it allows the total value of your business to grow with the taxes deferred.

    You do have a problem with AMT which means you have a lot of deductions, and that can be a problem. But an underlying problem with that might be that you are spending too much money on things that result in tax deductions. If you can’t deduct for depreciation, and that’s a significant expense, it might be time to consider a different corporate structure.

  26. Submitted by Alec Timmerman on 02/28/2011 - 08:02 am.

    Well under 6 figures, would be, say 80,000? 61% of that is 48,800. Are you telling me that you only bring home $32,000 per year, or less?

    The tax code is also graduated. You don’t pay 35% on the entirety of your income. I would put the tax code back to pre-Reagan tax cuts. That’s when all this deficit stuff started.

  27. Submitted by will lynott on 02/28/2011 - 01:36 pm.

    “It is hardly imaginable that there are any Democrats who support Gov. Dayton’s plan as is, just as there were very few Republicans who supported Gov. Pawlenty’s budgets when the situation was reversed in the last session.”

    Thanks for sharing, Hiram, but without facts and figures your statement is little more than speculation. No offense. Doug has been a respected member of the journalism fraternity for decades, and I’m sure he would not make such statements without facts. I repeat my call for the names, Doug. Or, Hiram, if you have them.

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