Revenue Commissioner Myron Frans, left, and Management and Budget Commissioner Jim Showalter joined governor Dayton as he announced his veto of the tax bill Friday, May 4, 2012.

Glen Stubbe, Dml - Star Tribune


By Revenue Commissioner Myron Frans' tally, he has led conversations about defects in the state's tax policies with 6,476 Minnesotans at 141 meetings in 48 cities over the past 11 months.

Editorial: Time for a big fix in state government

  • November 17, 2012 - 4:52 PM

"Fix it." That's the dominant message about the state's tax-and-spending systems that state Revenue Commissioner Myron Frans says he's gleaned through nearly a year of meetings with business and civic leaders across Minnesota.

A fiscal fix is indeed in order in 2013. Minnesotans have endured nearly a dozen years of recurring state deficits; service reductions; climbing fees, tuition and local taxes, and borrowing from schools and future revenues. More of the same is on the way unless something changes. Another billion-dollar-plus deficit has been forecast for 2014-15.

Chronic money woes are interfering with state government's ability to respond to new problems or effectively solve old ones. Minnesotans expect better. They elected a new DFL legislative majority on Nov. 6 with "fix it" in mind.

At a briefing in St. Paul last week, Frans and his spending-side counterpart Jim Schowalter, state management and budget commissioner, dropped broad hints that the fix DFL Gov. Mark Dayton will propose in a few weeks will be major. Details were scarce -- too much so, given that legislators will be in session again in only seven weeks. Precious time for selling a major proposal is slipping away.

But the Dayton administration appears to be headed in a promising direction. The positive indications include these:

•State goals and the performance of programs that aim to achieve them will be a driving factor in Dayton's spending recommendations, Schowalter said. A "dashboard" collection of several dozen numerical performance markers is in the works. It will guide the governor's proposals for allocating state's resources in fiscal 2014 and beyond, he said.

If the Dayton team can convince the Legislature to think the same way, they will make government both more adaptable in responding to state needs and more accountable to the public. Spending increases would need to be justified by the chance to achieve measurably better results -- not, for instance, by the need to make up for last year's or last decade's funding cuts. Underperforming programs would be easier to identify and either remedy or eliminate.

•The administration's No. 1 policy goal isn't an end to deficits, positive as that would be. It's job creation, the commissioners said -- and to their credit, they cite a need to improve Minnesota's economic competitiveness in the same breath.

That sounds like a commitment to avoid tax changes that would make Minnesota an outlier among the 50 states. Dayton's 2011 proposal to create a new high-income tax bracket, rejected by the Legislature, was precisely that kind of uncompetitive move. It would have given Minnesota one of the highest top income tax rates in the country. If Dayton has acquired a keener eye to competitiveness, a smarter tax proposal will emerge in 2013.

•Frans has diagnosed well the defects in Minnesota's increasingly outmoded state-plus-local tax system. Its exclusion of most services and too many e-purchases from the sales tax is depleting that revenue source. The income tax's built-in advantages for top earners aren't fair to the middle class. The plethora of well-intentioned tax breaks has created excessive complexity and hidden inequities. An increasing reliance on the property tax puts an undue burden on property-based businesses and homeowners on fixed incomes.

The requisite fix is obvious to us: Apply the sales tax to more purchases of services, Internet-based sales and clothing. Cap or eliminate many corporate and personal income tax breaks. Reduce sales and income tax rates, but not so much that deficits persist and local property taxes keep climbing. We hope the governor sees it that way, too.

•The late Gov. Rudy Perpich, Dayton's mentor, had "jobs, jobs, jobs" and "The Brainpower State." Dayton doesn't have a defining slogan -- but Schowalter might have been test-marketing a worthy candidate. Minnesota should be "a state of innovation," he said at the briefing. State government should aim to foster innovation through education, research and a culture both inside and outside of government that always strives for something better than the status quo.

"Where we are trying to go is not where we've been," Schowalter said. Looking backward might give Minnesotans comfort. This state still compares favorably with most others on many economic measures. But the trajectory of the past decade is in the wrong direction. It's time for a new path for state government. Dayton should take big, bold steps to lead the way.

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