Jason Lewis: Higher taxes? Oh, they make it sound so swell!

  • Article by: JASON LEWIS
  • February 25, 2010 - 6:35 PM

Let's see, in 2007 state legislators decided to spend a $2.2 billion dollar surplus, bringing the general fund to $35 billion for the 2008-09 budget cycle. That represented a whopping 40 percent increase in state spending in less than a decade. In 2008 (a bonding year), the same folks overrode a gubernatorial veto of a $6.6 billion tax hike while simultaneously adding a billion dollars in desperately needed borrowing for local pork-barrel projects. And last year, Democrats in the statehouse demanded yet another billion-dollar tax hike on everything from personal incomes to mortgages to beer. Anyone starting to see a trend here?

So imagine taxpayers' surprise when the think tank Growth & Justice, a front group for big spenders everywhere, calls for a massive tax increase to solve the state's budget deficit of $1.2 billion in the current biennium ("The case for paying higher taxes, happily," Feb. 21).

Boy, didn't see that one coming.

If taxes could solve Minnesota's budget problems we'd be far ahead of most states. The authors of the article, Charlie Quimby and Dane Smith, cited failing roads as a rationale for further burdening the taxpayer, but in 2006 voters approved the "Vote Yes" transportation amendment dedicating motor vehicle excise taxes for roads. Alas, at least 40 percent of the funds are being siphoned off for mass transit. In 2008, the so-called Legacy Amendment was approved, raising sales taxes nearly $300 million annually for such vital environmental needs (in the middle of a recession) as "cultural activities" and bike paths. And no serious budget observer denies that education as well as Health and Human Services are the prime drivers of the state's fiscal problems.

No, taxes are not Minnesota's problem. In fact, had lawmakers historically held general fund spending increases to just inflation and population growth, the state would have repeated surpluses. But they haven't, so last year the governor was forced to use his "unallotment" power to do it for them.

What's really got Minnesota liberals worried is that for the first time Minnesota's biennial budget has actually been reduced from one cycle to the next -- and no one's noticed.

Not that we're undertaxed, mind you. When you add all state and local funds, Minnesota still collects more than $22 billion dollars annually. Apparently that's not enough for the big spenders; taxpayers still have something left. But there is nothing "progrowth" or "just" about raising a state income tax that already puts a single earner making $75,000 into the highest bracket of nearly 8 percent. A married couple earning just more than $33,000 find themselves in the second-highest bracket of 7.05 percent.

Economist Richard Vedder recently concluded that the "overall state and local tax burden was 10 percent higher in the states with the greatest out migration."

Liberals love to rely on taxes as a percent of personal income as some sort of economic yardstick -- the basic premise of which suggests that taxes should go up every time your income does. It's true, of course, that "wealthy households actually pay a smaller proportion of their incomes" in taxes. They also pay a smaller portion of their everyday living expenses as a percent of their income. That's what the American Dream used to mean.

But it is far from true that the well-off don't pay their fair share. According to a 2009 Tax Incidence Study from the state Department of Revenue, the top 1 percent of Minnesota earners pay 25 percent of all individual income taxes collected. The top 5 percent actually pay more than the bottom 90 percent combined. That doesn't look like a tax code in need of more progressivity.

Minnesota will have to grow out of its budget mess. You don't do that by raising taxes on sole proprietors, LLCs and Subchapter S corporations, all of whom file individual income tax returns.

There are only two ways to increase individual wealth -- increase your own productivity or take it from someone else. There is little doubt our friends on the left seem obsessed with the latter. Unfortunately, converting the law "into an instrument of plunder," as Frederic Bastiat pointed out, has rarely done much for economic growth.

Jason Lewis is a nationally syndicated radio talk show host based in the Twin Cities and heard locally on KTLK Radio, 100.3 FM.

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