Thanks for explaining your view of the sales-tax-rise dynamic. Whatever the history to date, I see no reason why an increase (or decrease, for that matter) to any tax couldn’t be temporary, or why temporary-ness should be harder to arrange for a sales tax than for any other.

In any event, I’d support an income tax surcharge as a temporary measure. But relying on the income tax entirely to address a broad revenue problem seems skewed. I’d rather “surtax” a broader array of activity, including sales, at a lower rate than pile on disproportionately to the income tax.

Better yet, but maybe impossible in the short run, would be to adjust rates and fees and charges across the board in an intentional way, and thus avoid or minimize the awkwardness and gimmickry of surcharges and sur-surcharges. In India, for instance, the surcharge system has gotten completely out of hand. A nominally $100 airline ticket there can rise to $300 after the fuel surcharge, airport tax, seat tax, luxury tax, and (my favorite) the “dearness allowance” all kick in.

Minnesota will indeed have to “[rein] in … spending … when the economy turns down.” We will also need to look seriously at raising more revenue — as you’ve recommended. Our present Governor will allow no such reality-based thinking. It would be a calamity his successor was as bad.

An income tax surcharge is in fact probably the best way to raise temporary revenue. It doesn’t require a complete redesign of either our tax code or our tax forms. You simply add a new bottom line that directs the taxpayer to multiply by a set figure. This has been done in the past and usually does expire.

We also have current surcharges on all sorts of fees and fines. I pay a state surcharge on every building permit I purchase. If you get stopped for a seatbelt violation, the $25 fine turns into a $118 payment when the surcharges are added in. As you note, these are all just ways of obtaining additional revenue without attending to some underlying issue. (Example, legislators wouldn’t want to raise the seatbelt voilation fine to $100 as they would get pounded by the voters for doing so)

But Bright raises the more important issue in this discussion….are we going to recognize how much revenue we actually are taking in and run the state with that amount of revenue? Or are we going to say that it is impossible to run Minnesota on the revenue we are taking in and we have to increase taxes…either across the board (surcharge in income taxes) or in specific areas (sales tax, fees, etc.) And if you line up with the plan that more revenue is needed, what is your plan in 3-4 years when all that new revenue is gobbled up by the state machine and you need more revenue. Are you on a sustainable path or an unstainable path?

I noticed that Arizona recently put a 1% sales tax increase ($1 billion) on the ballot. The voters there approved the measure, which I believe will allow Arizona to balance their state budget. That may be a way to look at substantial revenue inceases. Minneosta did that in each of the past elections with a MVST tax dedication and an increase in sales taxes for conservation work.

The big issue as I see it is that Minnesota, and several other states, cannot reign in their spending adequately when the economy turns down. I will admit we have not had such a severe downturn in the past few decades, but that does not excuse legislators from dealing with the budget in a meaningful manner. When you still have county boards, school boards and city councils handing out employee raises, refusing to cut non-essential staff, refusing to reorganize departments, etc you are seeing ‘ostrich management’ hard at work—stick your head in the sand and pretend the problem isn’t there. We have budget trouble in Minnesota and in every county and city here. It takes tough action just like it takes tough action for a small business to weather this economy and stay solvent. But it has to be done.
.-= (Ray Cox is a blogger. See a recent post titled More Laser Work) =-.

Perhaps I’m dense, but I don’t follow you first paragraph. Are you saying that sales tax increases can’t be temporary? Why? And is an income tax surcharge, temporary or permanent, *not* a “way to increase revenue”?

I agree that we need to think about how much we can afford in operating our state (let’s keep in mind, too, the costs of underfunding public goods) and about how to allocate resources among competing goods. The legislature may have its problems as a venue for such discussion, but what alternatives would you suggest? Plebiscites? Blue-ribbon panels?

The budget should be balanced without adding revenue ‘until the budget is balanced’ because that is code for ‘until forever’.

Costs should be cut across the board, evenly. Let the private sector deal with life issues as they can and will. We have turned into a culture of babies who need mama gov and papa gov take care of our families, our addictions, our education, our housing, food and diapers. Let’s cut the budget by taking responsibility for our own lives and each other.

I think we really need to work on answers to what is the amount that is needed to operate a state properly. How much money does the U need? How much money does our E-12 need? How much money does our transportation system need? The legislature is actually a rather poor arena to discuss and debate those issues. It is however a decent arena for deciding how to fund those costs.
.-= (Ray Cox is a blogger. See a recent post titled More Laser Work) =-.

Thanks for making suggestions that have numbers attached. As for the specific numbers you cite … I wonder how specifically you mean them.

For instance, you mention a 10% income tax surcharge, a 1% addition to the sales tax (that’s about a 15% increase in the tax itself), and a 5% surcharge on fees and service charges. Is there some reason you chose these particular numbers (10%, 1%, 5%) rather than some others (9%, 2%, 6%), for instance? I’m not arguing for or against any of these choices — just wondering whether they’re chosen to add up in some way to solve a problem of a particular size.

In any case, I think these are useful, constructive suggestions. For that very reason our Governor would adamantly oppose most of them, and I fear the Republicans are too hopped up on “tea” to do what needs to be done.

Reduce the number of state employees by 5% through attrition and/or a hiring freeze.

Eliminate defined benefit pension programs for new state employees, any existing employees under the age of 40, and any employees with less than 10 years of service. Make actuarially determined lump sum (and continuing matching) payments to self directed, tax deferred, savings accounts to compensate for the loss of the pension benefit.

An emergency reduction in every existing state spending allocation by 1%. (If a program is budgeted for 100 million dollars it will only actually be allowed to draw 99 million.)

Eliminate funding for new, revenue negative, programs that have not been started. (If we got along without it so far, we can probably get along without it until the budget is balanced).

A 10% surcharge on all income tax payments until the budget is balanced.

A 1% increase in the sales tax rate until the budget is balanced.

Increase every state fee/service charge by 5% until the budget is balanced.

Patrick, I’m not sure what the pretty good deal you reference is. The top earners control a significant amount of wealth and pay a significant amount of taxes. MN could not exist as we do without having quite a few of them around.

I think what the real question for posters is “what percentage of overall revenue should the top 10% earners pay?” We see that it is about 38-40% now. Is that about right, not enough, or too much? If it is not enough what rate is enough, and if it is too much, what rate is more preferable…and where do we get additional revenue to offset what we give up by lowering the top rates?
.-= (Ray Cox is a blogger. See a recent post titled Laser Grading) =-.

Government can be really good at providing some services or products; other services or products, government is really poor at making good value judgments.

Given that the top 10%ile pulled in 43% of total income, the fact that they only paid 38.5% of the state tax burden sounds like a pretty good deal for them, which has been subsidized by (relatively) higher tax impositions on the rest of us.

You say:

The fact that you (or I) are more willing to send our “tax increase” to the Union Gospel Mission speaks for itself. I think the general feeling is that giving money to the government just wasting money while giving money to the Union Gospel Mission will accomplish something.

Objection.

My support of the Union Gospel Mission does not imply that I share the “general feeling” you mention. I don’t share it — and I wonder if you really believe yourself that the government simply wastes money. Or are you dramatizing the case for rhetorical effect?

I’d like to see our society — at large — do more than it does to make decent provisions for the poor. (And for the non-poor, but that’s another subject.) In practice the Union Gospel Mission and its ilk do admirable work in this area, and probably always will. In my idea of a better world UGM-like organizations would complement, not replace, the efforts of society at large. Meanwhile, there’s no logical contradiction in supporting both.

I agree that 38.5% is pretty close to 40%; both appear to be reasonable estimates for the proportion of taxes paid by the top 10% of income earners.

To put this in perspective, however, one needs also to know what fraction of income this top 10% of earners rake in. According to figures Phil cites in 472.1, this figure is 43%. These numbers imply that income of the top 10% is effectively taxed at a lower rate than the overall rate in the state. Granted, there are different calculations one might do to calculate “rates”, but these data seem at odds with your assertions in #477.

The thing I like about Pawlenty’s “no new taxes” pledge is that it forces some discipline upon the law making body -- the Legislature.

Re “voluntarily” sending it in … Indeed, not everybody would do so. I support a tax increase myself, for instance, but if no such thing is enacted I might reasonably conclude that any contribution I could make would do more good at, say, the Union Gospel Mission.

In any event, are you suggesting that people who think like me are somehow hypocritical about tax increases? Non sequitur, IMO.

With regard to the comment about ponying up -- There probably are a significant number of people willing to pony up their “fair share”. But, I doubt there are many who are going to voluntarily send it in.

Re 475.2 … I’m all in favor of discussing taxes and spending now, not later. But T-Paw’s one trick act—vetoing everything on the revenue side—doesn’t strike me as a good thing, or remotely conducive to the “discussion” you and I agree is needed. (Actually, the Guv tried another trick, unallotment. If this, too, was supposed to promote “discussion” it didn’t exactly work out, on account of being illegal. Oops!)

Re 476.1 … maybe I’m obtuse, and your question was directed to another poster. But I just don’t get your point: were you suggesting that people who advocate tax increases are themselves unwilling to pony up? Or what?

For example, on the local level we tax businesses at a much higher property tax rate. This isn’t based upon the level of services they use; it is based upon an ability to generate more revenue. On the other hand, we have a system of water, sewage, and garbage that is based upon the amount that you use.

Which system is more fair? I bet 100% of businesses and 90% of the public prefer the second system. In the long run, the second system is cheaper even for the less well off.

The source he alludes to is the following, from the State of MN: http://www.taxes.state.mn.us/legal_policy/other_supporting_content/2009_tax_incidence_study_links.pdf

Paul, I was wrong—shouldn’t trust this 58 year old memory—it was the WSJ that ran the opinion piece ‘Democrats always want higher taxes’.

David L thanks for pointing out the issue with tax courts. That is the kind of thinking that will indeed sink this wonderful country….if big public labor forcing the taxpayers to retain defined benefit pension plans doesn’t do it first.
.-= (Ray Cox is a blogger. See a recent post titled Whole House Remodel) =-.

To me it seems rather unfriendly to the average taxpayer to ignore other entities that, on average, take more from the state than the average taxpayer.