A temporary surcharge on high-income taxpayers made an unexpected debut at the Capitol Tuesday as leaders of the House DFL majority unveiled their broad-brush plan for balancing the 2014-15 state budget. They propose to employ that tool, last seen in Minnesota in 1982, to erase the remaining $854 million owed to the state's schools from the budget-balancing "shifts" of 2009-11.
The surcharge House DFLers envision would fall only on "the very wealthiest Minnesotans" and would be designed to automatically end, or "blink off," when the school debt is fully repaid. That could occur as soon as eight months from now if the next state budget forecast shows a sufficient surplus. Current law commits mid-biennium surpluses to school debt repayment.
Partisan skepticism greeted the notion of a blinking tax. "Nothing is more permanent than a temporary tax," said House GOP minority leader Kurt Daudt.
But history says otherwise. The 1982 surcharge, which started at 5 percent and grew to 10 percent as the state faced recurring deficits, blinked off in early 1984 as the economy rebounded and the state's finances stabilized. Unlike the new idea, that surcharge applied to all income tax payers at the same percentage level.
The surcharge hasn't blinked back on since. But the Republican governor who initially allowed it to become law without his signature was already recommending another blinking surcharge in September 2008 as a way to cope with the rapidly unfolding Great Recession. His words at the Humphrey Institute that day weren't heeded. In retrospect, they seem prescient and wise:
"Don't wait until we're completely out of recession to increase taxes. People start thinking you can get along without that money. That's not good. The state has a responsibility to carry out the work society has given it. The longer you delay, the more damage you do to that work."