Recent events at the Capitol make clear that we Minnesotans are on track for one of the biggest tax increases in recent state history.
But suppose you could wave a magic wand and erase our budget deficit, pay off the $801 million left from the school shift, actually have a surplus — and do it all without raising taxes. There’d be dancing in the streets, right?
Well, our legislators could do precisely that right now. They would simply need to freeze spending for the next biennium at current levels — about $35 billion — and we wouldn’t need a dime in new taxes.
Fellow Minnesotans, our state doesn’t have a revenue problem — we have a spending problem. Our budget train wreck stems from the fact that our current one-party government wants to boost spending for 2014-15 by about 10 percent.
Opponents joke that legislators are trying to solve a $627 million deficit problem with a $2.5 billion tax increase. (The deficit arises from autopilot spending increases included in state budget projections.) And we might not have a deficit at all if our budget process required lawmakers to review program effectiveness instead of automatically bumping up spending at the start of a new biennium.
As it is, taxes are going up big-time. And it won’t just be the rich who pay.
Current proposals from DFL lawmakers add a fourth income tax bracket, boosting taxes on incomes as low as $80,000 for a single filer and tacking a surcharge on the wealthy that would make our top rate one of the highest in the nation. The House lowers the income threshold at which higher rates kick in on every bracket, which will raise taxes on single filers making as little as $21,651. For some, higher rates will be offset by larger deductions due to conforming with federal tax changes, but a majority of these households will experience a tax increase.
Minnesotans at every income level can expect to be hit by new taxes on items like clothing, gas and alcohol and car repair. And proposals for new or increased fees include a $5 surcharge on homeowners and car insurance policies, $3 on a driver’s license and a $15 surcharge on traffic violations.
We see the fruits of the DFL’s tax-and-spendaholic mentality in education proposals. Legislative leaders assure us that if we fork over $550 million for new pre-K-through-12 spending in the next biennium, Minnesota will boast “the world’s best workforce”—and a 100 percent graduation rate — by 2027.
Reality check: Today, black and Hispanic students’ graduation rate is about 50 percent. Minority students are now 26 percent of Minnesota school enrollment. By 2027, they’ll be a far higher percentage.
How does the DFL aim to produce “the world’s best workforce”? Believe it or not, lawmakers will start by eliminating academic standards: the GRAD tests that measure whether students possess high-school-level competence in reading, writing and math.
At the same time, legislators plan to throw millions more at our K-12 system — though it’s failed abysmally at improving minority students’ academic achievement. Instead of real reform, we’ll get fuzzy, happy-talk “career and college readiness” programs, state-funded preschool for low-income children and universal all-day kindergarten.
Unfortunately, research suggests that early learning gains by children from low-income households tend to fade by third grade without major K-12 reforms that enable them to build on those gains.
Legislators also intend to shower public employees with goodies. The Senate has approved a 35 percent pay raise for lawmakers. Public employees’ new contract will cost $174 million in new spending—thanks to pay increases and the fact that public employees still pay zero percent of the cost of their individual health insurance premiums.
Welfare-related spending will also go up. Minnesota already spends more per low-income person on public support than any other state except Alaska, according to a recent report from Center of the American Experiment, where I am a senior fellow. This disparity suggests that a careful reconsideration of benefit and eligibility levels is in order.
Minnesota’s relentless upward trend in spending is not sustainable. Today, state spending would be $14.6 billion lower if it had been held to the rate of inflation and population growth since 1996, and $4.8 billion lower if it had been held to state economic growth.
Illinois and California, both run by Democrats, provide cautionary tales. Both have passed huge tax increases in an attempt to support their spendthrift ways. Both now have among the nation’s highest unemployment rates and lowest credit ratings, and are national leaders in out-migration.
By 2027, it may not matter if Minnesota—by some miracle—does have the “best workforce in the world.” If taxaholics still run St. Paul, businesses that might employ those workers may have fled to greener pastures.
Katherine Kersten is a senior fellow at the Center of the American Experiment. The views expressed here are her own. She is at email@example.com.