A group of civic and business leaders from both sides of the political spectrum offered a plan on Thursday to help solve the state’s budget deficit that, if nothing else, shows the resolve of Minnesota residents and leaders to make this state work.
The strength of their work lies in the idea of creating a “third option” for solving Minnesota’s budget problem. This suggests of course that Gov. Mark Dayton and the GOP Legislature’s plans are not the preferred option. We suggested compromise from the start.
The group spearheaded by former Republican Gov. Arne Carson, former U.S. Sen. Dave Durenberger, and former Democratic Vice President Walter Mondale was to offer a third option and make it easier for both sides to consider a third party’s compromise ideas versus losing face by compromising with their opponent.
The third party idea made sense, and while some of the specific proposals of their plan were really not politically feasible — increasing taxes on all Minnesotans — the broad ideas had merit and might be a starting point for further discussions between Dayton and the GOP.
The group also recommended expanding the sales tax and lowering the rate as a long-term solution. But, as we’ve said before, we think that’s part of the solution that should be employed now. The sales tax expansion to business services like legal and accounting as well as others makes sense for today’s economy. Outdated exemptions that are no longer needed should be removed. Sales taxes can be more fair because they give taxpayers the option of paying or not based on the amount of goods they buy.
Actually, expanding the sales tax would more than likely achieve the fairness Gov. Dayton is looking for because wealthy people typically buy more goods and higher priced goods — cars, services, dinner out — than average folks. The wealthy would be paying more under an expanded sales tax.
Businesses, on the other hand, might get a break if we lower the rate, again, giving them the choice of what to buy.
The Carlson/Mondale commission also recommended a growth rate of state spending equal to ongoing revenues without budget gimmicks, but suggested drawing in more revenue through alcohol and tobacco taxes.
The alcohol taxes would simply be adjusted by an inflationary amount since they hadn’t been raised in 20 years and tobacco is something all three sides seem to favor. Republicans have proposed getting money from our incoming payments on the tobacco settlement, while Dayton and the Carlson/Mondale group have suggested cigarette taxes.
Of course, taxing tobacco and alcohol assumes people will continue consuming at currents rates, which may or may not be the case.
But all sides need to get serious to shore up our financial and budget strategy. Bond rating agencies are starting to see our lack of solutions as a risk to putting higher interest rates on Minnesota bonds. Higher costs of borrowing will only exacerbate our problems.
For now, it seems we need a limited lights-on bill to get people working again, and a third option-based solution for the final tough compromise.
We know the future is fraught with challenges: Our tax structure is higher than most other states. Our services are better, but they are costly. Tax reform and user fee reform should be on the agenda sooner than later.
Demographic shifts will make the financing of our state and its services more difficult in the future, not easier. It’s time to come up with solutions now.
We’re not interested in who “wins” this showdown. We’re interested in representative government of the people not of the party.