The 2009 session of the Minnesota Legislature enters its most crucial phase over the next two weeks as House and Senate negotiators hammer out differences in budget bills before sending them on to Gov. Tim Pawlenty. The most crucial of bills will be the omnibus tax bill, which will fund state government.
It is also the one bill that could send the Legislature into overtime, if Gov. Pawlenty steadfastly sticks to his promise of vetoing any kind of state tax increase.
The House and Senate, controlled by Democrats, both call for tax increases but in different forms. The Republican Pawlenty would garner $1 billion by selling bonds, repaying them with the annual tobacco lawsuit settlement Minnesota receives.
There is little doubt Pawlenty will veto any tax bill that emerges from the Legislature, but with a deep $6.4 billion budget deficit facing Minnesotans, the time has come to bite the bullet and call for tax increases that are fair, progressive and which put Minnesota back on track for economic prosperity.
At this point in time, we believe the Minnesota Senate's tax bill provides that balance and should prevail in conference committee and should be signed by Gov. Pawlenty should it reach his desk.
The Senate bill recognizes the fact that Minnesota lawmakers in good budget times in the late 1990s, with a budget surplus, gave that money back to taxpayers in the form of tax cuts. But in the early 2000s, the economy soured and the state has sustained structural imbalances ever since.
What is key is that the first major budget problem -- a $4.5 billion deficit when Gov. Pawlenty took office -- was solved with shifts, use of one-time monies and deep budget cuts. No state taxes were raised. The budget knife has been held over state spending ever since, and the governor should be thanked for slowing the increase of state government spending.
But a breaking point has been reached and it's time to begin to reverse the tax cuts made in good times, while still seeking efficiencies and reductions. That's the thinking of Senate DFLers. They would make adjustments in the three current tax brackets, and add a fourth tier for married Minnesotans making more than $250,000 or single Minnesotans with more than $141,250 to make the tax system more progressive.
Above all else, the tax bracket adjustments ensure that the state budget is structurally balanced through two bienniums. Neither the House nor Pawlenty can make that claim with their proposals. In fact, the House plan would leave a $1.8 billion deficit and the governor a $2.6 billion deficit at the end of the 2012-13 biennium.
What is also important is that the Senate's tax adjustments would go away -- returning to current tax law -- once structural balance is achieved in four years.
The same amount of money may be raised through a tax surcharge, and that terminology may appeal to Gov. Pawlenty. Regardless, the approach taken by the Senate is reasonable, common-sense tax policy and should prevail.