An Economist's View: No justifying so much soaking of Minnesota taxpayers
Last week, Minnesota's state government was forecast to take $1 billion more from the state's taxpayers in the next two years than it needs to cover its projected spending over that same period. This projected surplus -- smaller than the $1.5 bil...
Last week, Minnesota's state government was forecast to take $1 billion more from the state's taxpayers in the next two years than it needs to cover its projected spending over that same period. This projected surplus - smaller than the $1.5 billion projected in December - raises some important questions for state policymakers. What should they do with it? Should they spend it on new or existing programs? Should it be left with the people it is to be taken from with a tax cut? Should they wait to see how closely the forecast matches the reality?
Minnesotans now know what Gov. Tim Walz wants to do with it. Incredibly, not only does he want to spend the whole $1.5 billion surplus, he wants to spend even more. Under the governor's budget, spending in the next two years would jump from $45.5 billion to $49.5 billion. Much of the increased spending would go for education, health care, and what the governor calls programs to improve "community prosperity."
So, with his appetite for spending outstripping state government income, even with a projected billion-dollar budget surplus, Gov. Walz is planning to take more of your money from you.
In his budget, he proposes raising gas taxes by 20 cents per gallon. This would be a huge hike. At present, Minnesota's gas tax is near the national median average: We're No. 28 in the country. Gov. Walz's increase would move our state into the top five nationally. It would cost the average driver an estimated $156 a year.
Gov. Walz also proposes to raise the vehicle registration tax, the vehicle sales tax, and the fee for license tabs. The Minnesota Automobile Dealers Association estimates that, on a common Minnesota vehicle, such as a $28,000 Ford F-150 truck, both the sales tax and the registration tax would jump about $105 each. That's a total of about $210 more in taxes per vehicle.
"Minnesota's crumbling infrastructure is putting our safety at risk," Gov. Walz said in defense of these hikes. Indeed, civil engineers recently reported that parts of Minnesota's transportation system are in "poor" condition and any gas tax hike could only be used to fix roads and bridges, which the report graded "C" and "D+."
But, looking at the numbers, it is hard to believe the state's government is so hard up it cannot fulfill a core function like maintaining roads without a fresh deep dip into taxpayers' pockets.
Data from the Minnesota Department of Revenue shows that, in real terms, Minnesota's Fuel Excise Tax revenues in 2017 - the most recent year for which we have data - were higher than in 38 of the last 44 years. Indeed, eight of the top 10 years for revenue since 1974 have been in the last decade. That same data shows state tax revenues more broadly have risen by 31 percent in real terms since 2010 and in real per-capita terms by 25 percent over the same period.
This is complicated a little by federal taxes and spending. But, according to Census Bureau data, Minnesota's state government total revenue in 2017 was higher than any year previously. Our state government's total expenditure in 2017 was higher than in all but one of the previous years.
In terms of revenue, politicians in St. Paul have never had it so good. Why then are they pleading poverty and planning to take more of their citizens' money from them? If they are having trouble funding a core competency, such as roads, that would seem not to be the result of a shortage of revenue but of a mistaken allocation of the revenue they have.
With all the cash they get from us and the surplus they are projected to get, there is no excuse for soaking the state's citizens afresh to pay for something so basic.
John Phelan is an economist at the Center of the American Experiment.