State needs progressive, stable tax policy
Gov. Tim Pawlenty has cut the budget using unallotment. Whether he overreached in his authority using this statute (intended for emergencies or to address small budgetary shortfalls) may be judged by the courts, but will certainly be judged by the citizenry. The Legislature will surely tighten the language in this statute to ensure that future governors don't abuse this process.
Even more egregious than this abuse of power, was the governor's refusal to work with the Legislature to correct a financing pattern that continues to be mired in failure because we don't have stable sources of revenue. This fiscal irresponsibility must be corrected or we will continue to have boom and bust cycles.
The Tax Reform Commission appointed by the governor came to similar conclusion by stating, "It's becoming clear that state tax systems are not only failing to keep up with dramatic shifts in the U.S. and world economies, but are a drag on economic growth."
At the beginning of this legislative session, members of the DFL House were openly talking about this being the year to fix this seemingly intractable problem, despite the deep and painful recession we are facing. Many of us believed the public would support bold changes in times of crisis. With a $6.4 billion deficit, we advocated for significant government reform, strategic cuts to programs and departments, and some increases in taxes. The governor advocated gimmicks like borrowing schemes, shifts and across the board cuts with no plan for the future.
We tried to engage the governor in a meaningful dialogue on equitable taxation and stability in our long-term budget planning. We were open to business tax relief to spur economic development in exchange for a more progressive income tax system or by expanding the sales tax base. If the governor had abandoned his "no new taxes" pledge that only panders to the base of his party, I'm confident we could have reached common ground on taxation that would have benefited our state, not just in this biennium, but on into the future.
The governor has repeatedly attacked the Legislature for suggesting a balanced approach to resolving the deficit. Yet, the Center on Budget and Policy Priorities states, "Contrary to what some consider common wisdom, a tax increase can be good policy during a recession." They report that 23 states raised taxes this year and 13 others are considering increases. Interestingly, during the recession in the early 1990s, 44 states raised taxes by significant margins.
The governor refused to compromise. His actions will result in cuts to programs that help the most vulnerable in our state. Job losses will be in the hundreds and maybe thousands and a shift in the tax burden from the state to cities and counties resulting in higher property taxes -- a regressive tax that should be reduced, not increased.
Perhaps even more irresponsible, is that the governor's actions will ensure another massive deficit in the next biennium when he will be running for president rather than running our state. Delayed payments to schools, a budget process where he refuses to factor in inflation, a depleted reserve account, and no new sources of revenue are the results of the governor's political ambitions.
Reforming our budget process in the future requires leadership and that has been in short supply with Gov. Pawlenty. Correcting our structural budgetary problems has been recommended by former governors, finance commissioners, and legislators of all political parties. To grow our economy we must invest in education and implement a sound progressive and stable tax policy.
Michael Paymar, DFL-St. Paul, is a member of the Minnesota House and chairman of the House Public Safety Finance Committee.