Counterpoint to Star Tribune Editorial
The Minnesota House DFL has proposed to balance the state’s budget without gimmicks, including paying back Minnesota schools with a temporary two-year income tax surcharge on the wealthiest Minnesotans. This was not a proposal we took lightly — but the Star Tribune Editorial Board dismissed it without much evidence (“Nix anticompetitive state budget ideas,” March 24).
For more than a decade, our budgets have been balanced irresponsibly with deep cuts and accounting gimmicks. Taking money from our schools was the “cookie jar” neither party could resist. This stopgap reached a tipping point for Minnesotans when the 2011 Republican-led Legislature borrowed a record $2.4 billion from our schools.
On the campaign trail, Minnesotans told us loud and clear that this was no way to budget for our state’s future.
Our budget invests significantly in education as the best way to make our state competitive in years to come, including paying back the $850 million we owe our schools in the next two years. The temporary income tax surcharge on Minnesotans earning more than $500,000 per year (and only on the money they earn over $500,000) is dedicated to paying back the debt owed schoolchildren and will go away once our schools are paid back. It would leave our budget balanced and without any debt to our schools — something that hasn’t happened since before the Great Recession.
Like most families, we believe you ought to pay off debt before you spend money on something new.
No one questions that paying back our schools is the right thing to do. Nevertheless, the Star Tribune editorial criticized our plan using the same “Chicken Little” claims that Republicans have made for decades to defend failed policies that put the interests of the wealthiest Minnesotans ahead of the middle class.
First, the Star Tribune too readily accepts the long-held Republican talking point that if we increase taxes on the very wealthiest Minnesotans — even by a fraction — then “job creators” will flee the state. Check with economists who have studied the issue; the facts don’t bear this out. If this theory were true, businesses would have left long ago for the likes of Mississippi and other “low-tax, low-value” states. I’ve also spoken with local Fortune 500 CEOs who acknowledge that they’ll continue to attract and retain great Minnesota talent if this temporary surcharge becomes law.
Second, the Star Tribune wrongly assumes the temporary surcharge would significantly affect small businesses. In fact, our surcharge would affect less than 3 percent of Minnesota small-business owners. And the increase would affect only the income that those small-business owners take as a profit — after employees are paid and business investments are made. In other words, the tax would only kick in after a small-business owner “banked” half a million dollars in personal income from the business — and just for two years.
Would this slight tax increase affect the spending habits of the very wealthy and harm our economy? A survey of the top 1 percent of wage earners found that such an increase wouldn’t affect their spending or investment strategies. They’d simply have a bit less to invest in their retirement stock portfolios.
Most important, we believe our plan is a better approach than continuing to squeeze the middle class. For more than a decade, Minnesota budgets have protected the very wealthy at the expense of middle-class Minnesotans. Property taxes are up 86 percent. Tuition has doubled. Yet we have seen deficit after deficit.
Meanwhile, as a percentage of income, the total state and local taxes paid by the highest income earners has remained lower than middle-class Minnesotans’ taxes. The inequity is even more pronounced when you consider that 93 percent of the growth in the first year of the recovery from the Great Recession went to the top 1 percent of income earners. Minnesotans know that doesn’t pass any common-sense test of decency or fairness.
The good news is that there is bipartisan agreement in the House that the school shift ought to be paid back immediately. The only problem is that the Republicans haven’t identified a way to actually pay for it.
No one likes paying more in taxes — but it should offend us that we owe our school kids $850 million. It’s time to step up and pass a budget that pays back our schools responsibly and fairly.
And if anyone else has a better idea on how to do right by our kids, we are all ears.
Rep. Paul Thissen, DFL-Minneapolis, is speaker of the Minnesota House.