By Rep. Dean Urdahl
The question we should ask ourselves in examining various components of a new state budget this year is this: “How will this help our economy?”
Gov. Mark Dayton recently issued his proposed budget for the new biennium. Dayton is not empowered to draft legislation, but his recommendations are likely to serve as guideposts for the new Democratic majorities as they craft bills. We are still working to sift through the details of the governor’s proposal, but several things are clear right off the bat.
The governor proposes increasing state spending by $2.5 billion and seeks a state-record tax increase of $3.7 billion. Dayton’s plan ends up being $1 in spending reductions for every $16 in tax increases. Our economy is growing at a 3-percent annual rate and it concerns me the governor wants to exceed that threshold, particularly with such an imbalanced plan.
I also am concerned about the $2.1 billion in sales-tax increases the governor proposes. Sure, he wants to lower the sales tax to 5.5 percent, but extending the sales tax to previously untaxed goods and services would be detrimental to middle-class citizens. Things like haircuts, oil changes and Internet purchases would be subject to taxes. He also proposes increasing taxes on cigarettes by 94 cents per pack.
Dayton has consistently said that he wants the rich to pay their “fair share,” but these taxes would hit all of us, not just the so-called rich. This would be another blow to most Minnesotans, who recently saw their take-home pay reduced by 2 percent because the federal government allowed payroll taxes to increase.
I favor the governor’s proposals to reduce corporate taxes by 1.4 percent and to freeze business-property taxes for two years. On the other hand, Dayton also is seeking to increase taxes which state officials estimate would cost businesses $1.5 billion in 2015 alone.
Our state economy is showing signs of recovering from the recession and I am concerned new business taxes would deal our state a setback. Consumers would likely absorb much of these costs in the form of higher prices. Our businesses climate already is ranked among the nation’s worst and new taxes would put us at an even greater disadvantage.
For all the increased spending and additional taxes, one item is conspicuously absent from the governor’s budget plan: Prioritized repayment of funds we owe our schools. Democrats campaigned hard on repayment of the K-12 school shift, yet Dayton’s budget would not retire this debt until 2017.
We already have repaid the entire 2011 shift and trimmed a significant portion the former Republican majority inherited. What remains is $1.1 billion in K-12 debt enacted under the previous Democrat majorities and Gov. Tim Pawlenty. This old debt should be paid in full before we even consider raising taxes and spending new money in new areas.
I will be reading the details of the governor’s budget recommendations with great interest in the upcoming days and weeks. The true work in establishing bills that will form our budget will begin in earnest after we receive an updated state economic forecast in February.
All indications are the trend of generating surplus revenues will continue as the improvements we made in the last biennium take root. That is all the more reason to limit our spending to available revenue, protect Minnesota taxpayers from further burden and let our economy grow. Those are three key components to keep in mind as ask ourselves, “How will this help our economy?”