Other view: Don’t spend projected state surplus; cut taxesAs he should have, Gov. Mark Dayton made clear he wants to use the expected $1.1 billion state budget surplus announced last week to repeal three unnecessary sales taxes on businesses and provide income tax relief for the middle class.
By: St. Paul Pioneer Press, St. Paul Pioneer Press
As he should have, Gov. Mark Dayton made clear he wants to use the expected $1.1 billion state budget surplus announced last week to repeal three unnecessary sales taxes on businesses and provide income tax relief for the middle class.
The lukewarm response from legislative Democrats, however, requires a reality check.
House Speaker Paul Thissen said repealing the business taxes would be “an option.” Assistant Senate Majority Leader Katie Sieben said it’s “too early to say” if the Senate would be in support.
There’s no such uncertainly for many other Minnesotans. Lawmakers who drove up taxes by $2.1 billion to cover their spending increases must prepare to return to the Capitol to fix last session’s mistakes.
The reason to act quickly is compelling: Businesses need certainty as they make decisions about their 2014 operations. They’ve waited long enough to be relieved of taxes on business equipment repairs and equipment purchases by telecommunications providers, as well as a tax on warehousing services scheduled to take effect April 1. The changes would reduce anticipated state revenue by $231 million during the current biennium.
Dayton also said $205 million should go for middle-class tax cuts by conforming Minnesota law to last year’s federal tax cuts. Such action would eliminate the so-called “marriage penalty” for 640,000 Minnesota taxpayers and increase a “working-family credit” for an additional 63,000 taxpayers.
“We pitted the state against the families and businesses of Minnesota and the state won,” said Ted Lillie, executive director of the Taxpayers League of Minnesota.
The former state senator wants to make sure the governor follows through on his commitment. “We don’t need that revenue; we have overreached; we have overtaxed,” Lillie told the Pioneer Press.
A note of caution from Minnesota Management and Budget Commissioner Jim Schowalter is well-advised, especially when it comes to the line already forming to advocate for even more new spending: “This forecast shouldn’t be mistaken for money in the bank.”
The state is only six months into its two-year budget cycle, he has explained, and economic conditions could change. Experts also have expressed concern about the many factors in play. We must wait until February for an updated budget forecast.
But the state’s outlook, borne on a nation-leading economy, is good and seemingly getting better. According to state economist Laura Kalambokidis, Minnesota’s economy is growing faster than the nation’s, and it has recovered all the jobs lost during the recession.
Dayton, too, cited the economy as a factor in the gains. The credit, he said, “belongs first and foremost to the people of Minnesota.”
We think much credit also should go to Republicans, whose insistence on at least a measure of restraint set the state on a useful path before they lost the legislative majority in 2012. Remember: Spending piles up, so every dollar not spent today is a dollar-plus-inflation that doesn’t have to be spent tomorrow.
The newly projected surplus would allow the state to repay the remaining $246 million of its debt to public schools, after payments were shifted during the recession. When that and other money borrowed from a state airport fund are repaid, the forecast balance amounts to $825 million.
According to the state, anticipated revenue collections have increased by $787 million, or 2 percent, since the end of the legislative session. Higher income and corporate tax collections account for almost all the expected revenue growth.
Projected spending dropped by $247 million, or 0.6 percent. A recent AP report explains how an improving economy can produce millions in state savings: “People who turned to government assistance programs during the recession are less reliant as they move back into the workforce, driving down one of the highest-cost portions of the budget.”
Schowalter endorsed putting some of the extra money in a rainy-day fund and advised lawmakers and interest groups who want to spend the surplus to “proceed with caution.”
Wise words. We’d take them a step further and say to the spenders: Just don’t proceed.
When they return in February, lawmakers will need to bring with them both the resolve to fix their mistakes and the will to resist new spending.