Jason Lewis: Deadlock at the state Capitol

  • Article by: JASON LEWIS
  • Updated: May 30, 2011 - 8:36 PM

At the state Capitol, Governor Mark Dayton

Photo: Richard Tsong-Taatarii, Star Tribune

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The disconnect between the way government and private enterprise conduct business is never more evident than during hard times. Private-sector employees see their wages and benefits frozen, or in some cases permanently cut.

Doing similar things in the public sector brings howls of protest to state capitols everywhere. So in Minnesota, we merely "delay" payments promised to all the beneficiaries of state spending.

Now the empire is striking back, demanding reimbursement for deferred monies. Which explains why our state budget is $5 billion in the red even though revenues for the next biennium are going up.

That's right: If we were to actually freeze spending in the general fund, we'd have a surplus for 2012-13. Welcome to baseline budgeting, Minnesota-style.

According to the February forecast from the office of Management and Budget, "total resources available" in the next biennium will be just over $34.2 billion, a 10 percent increase from the $31.1 billion for fiscal years 2010-11.

What Gov. Mark Dayton describes as "drastic and extreme" cuts are really reductions in a budget that was slated to rise to a whopping $39 billion -- hence the deficit.

Republicans say that a 10 percent rise in state spending is enough, but Dayton insists on more. He's now calling for income tax hikes of $1.8 billion in order to finance a $36 billion budget, or a 16 percent increase in spending.

We should all be so lucky.

Big-spending apologists like to include federal "stimulus" spending in the 2010-11 baseline, so as not to make Dayton's proposals appear so large. Nice try, but a one-time gift from Washington is just that and can hardly be counted when measuring state budget figures.

No matter, because the governor says we can just tap 45,000 high-income earners for the extra cash. Hey, it worked in Europe -- well, OK, maybe not.

The founding fathers, according to Alexander Hamilton, preferred indirect taxes for a reason: When everyone has to pay an excise or consumption tax, those levies "contain in their own nature a security against excess."

Besides, disproportionately relying on income taxes from the "wealthy" is a recipe for budgetary chaos. Incomes at the top tend to ebb and flow with the economy, so once the downturn hits, you see massive drops in revenue streams.

It's no coincidence that the high-income tax states of California, New York and Illinois are those with the biggest budget problems.

Both New York and Maryland imposed a so-called "millionaire's tax," and both have failed to bring in the promised revenue. New York Gov. Andrew Cuomo now wants to let the tax expire this year.

And just one year after the tax was passed, "a third of the millionaires had disappeared from Maryland tax rolls," notes Reason magazine.

Just take a quick glance at which states are picking up House seats in this year's congressional reapportionment, compared with those that are losing their population and economic base.

Dayton may think that the well-to-do came by their wealth the way he did. Disincentives to work, save and invest have little effect on those who've won the lottery of life.

But his plan to raise the top rate to 10.95 percent in a state that already derives more than 40 percent of general fund revenues from taxes on income puts Minnesota in very dangerous territory indeed.

A high price to pay for protecting the welfare state in Minnesota. A state where the Department of Health is paying new participants to get free mammograms and where Food Stamp enrollment is now at an all-time high.

The latter is due in part to an ailing economy, but also to an easing of eligibility requirements in the last few years, including an apply-by-phone option.

A January census report showed that "state government spending on public welfare was greater than 30 percent of general expenditures in 11 states, led by Minnesota (37.5 percent)."

This is what Mark Dayton is so desperate to defend?

Jason Lewis is a nationally syndicated talk-show host based in Minneapolis-St. Paul.

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