Lori Sturdevant: Wrestling with tax policy: Politics vs. principles

Tax principles matter, at least to some at the Capitol. Does that include Pawlenty?

By LORI STURDEVANT, Star Tribune

Last update: February 16, 2008 - 4:55 PM

Conspicuous -- at least to me -- among the "no" votes for the outdoors 'n' arts constitutional amendment at the Legislature Thursday were the names of the DFL chairs of the House and Senate tax committees, Sen. Tom Bakk and Rep. Ann Lenczewski.

A cynic would chalk up their opposition to turf protection. If voters raise the sales tax and dictate how the money it raises will be spent for the next 25 years, the tax chairs can't control that money themselves.

But that cynic would be one who doesn't know Bakk and Lenczewski. If the Legislature had a Tax Policy Purists' Caucus, it probably could meet in a closet -- but these two would be in attendance.

Lenczewski, who represents Bloomington, voted against the amendment because she thinks the Legislature, not the Constitution, should decide how state money is raised and spent. Bakk, of Cook, voted no for that reason and one more: He doesn't want Minnesota to rely any more than it already does on taxes that take a bigger slice of the incomes of the poor than of the rich.

It's not all petty jealousies, self-protection and partisanship at the Capitol. Tax principles, the kind economists tout, count with at least some of the people in charge.

The Legacy Amendment is on its way to the Nov. 4 ballot. But a new wrestling match between tax principles and politics has quietly begun -- and before it's over, it could become important (not to mention entertaining).

The line in Gov. Tim Pawlenty's State of the State speech Wednesday that got the tax crowd juiced up was his launch of a new, business-friendly tax study group. It will be composed of people with "direct experience in creating private-sector jobs," he said, and would recommend ways to "reduce taxes and regulation that discourage job growth."

That would be unremarkable, but for the fact that only a few months ago, the Legislature launched a fairly major tax-and-spending study group. Though it's the brainchild of two DFLers, Lenczewski and Senate Finance chair Dick Cohen, five of its 15 members are Pawlenty appointees, and two others were chosen by GOP legislative leaders.

What's more, the roster includes some impressive pedigrees -- at least three economics Ph.D.s, four former state finance commissioners, four former legislators (three of them Republicans). It doesn't look like a lineup that would make a Republican governor -- even a politically ambitious one -- nervous enough to arrange in advance for a second opinion.

Lenczewski enlightened me: One of the nine tax and spending principles that the State Budget Trends Study Commission will examine is "sustainability." That's wonk shorthand for: Does the tax system produce a revenue stream that grows apace with the population and the economy, or is it prone to shortfalls?

Minnesotans don't need economics degrees to know the answer. They just need to read the headlines. The forecast now is for a $373 million deficit, in a budget that only in June had nearly $300 million on the bottom line. Stay tuned for more red ink, soon.

You can blame a national economic slowdown for that dive -- and you'd be right, and yet be missing something. The big boomer bulge in the population is lurching toward retirement. That means "income tax receipts are going to start declining," Lenczewski said, even as the need to replace boomers in the workforce ratchets up pressure for more education spending.

Meeting employers' need for skilled workers is more important to helping the economy than fiddling with business taxes right now, Bakk argued. "I don't think there's much wrong with Minnesota's business climate from a tax policy standpoint."

Pawlenty evidently thinks otherwise -- hence the Second Opinion, or, as he calls it, the 21st Century Tax Reform Commission.

The State Budget Trends Study Group has posted on the Web the list of the nine principles that will guide its work (you can read them at www.startribune.com/a4018). Here's a gentle suggestion to Pawlenty's group, if it wants its work to be taken as seriously: Post your principles, too, and put them before politics.

Lori Sturdevant is a Star Tribune editorial writer and columnist. Contact her at lsturdevant@startribune.com.

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