Gov. Dayton’s budget
Gov. Mark Dayton laid out a budget this week that calls for higher taxes for those who can afford it, a long-overdue increase in education funding, and property tax relief.
The governor’s priorities are sound, even though more discussion is needed on the details—particularly his proposal to extend the state sales tax to higher-end clothing and a wide range of services. Overall, Dayton’s plan makes Minnesota’s tax system fairer and reinvests in the right things. Education, from pre-K to the state’s colleges and universities, has suffered tremendously over the past decade, exacerbating funding disparities among school districts and pushing public college tuitions in Minnesota to among the highest in the nation.
Property tax relief is another critical need addressed by the governor. Dayton proposes increasing local government aid, which will help municipalities keep levy increases to a minimum. For Ely, the governor would boost LGA by approximately $150,000 a year, while Tower and Cook would see more than $20,000 in additional funding. Under Gov. Tim Pawlenty, property taxes skyrocketed as cuts in LGA forced local governments to replace lost state funds with local dollars. In reversing that trend, cities should work to direct most of the new revenue towards lowering property taxes, rather than encouraging new spending initiatives.
Not surprisingly, Dayton’s proposal to boost the top marginal income tax rate came under immediate fire from Republican lawmakers, who contend it will hurt economic growth in Minnesota. That’s an article of faith among Republicans, but it’s one that doesn’t stand up to scrutiny. Up until the late 1990s, Minnesota had substantially higher income tax rates at the top end, but that didn’t prevent the state from enjoying an economy that consistently outpaced both the nation and the region for job creation and income growth. That’s consistent with a recent study by the nonpartisan Congressional Research Service, which found that tax rates on the wealthy had little or no impact on rates of economic growth. If anything, the research has found that higher tax rates on the wealthy can boost economic activity because they reduce income inequality, which is good for the economy.
Gov. Dayton has responded to GOP criticism by asking them to propose alternatives. Of course, it doesn’t take much imagination to know what sort of alternatives Republicans would suggest. For the past decade, the state’s voters have watched with increasing alarm as the GOP’s “no new tax” policies drained the state’s bank accounts dry, and forced the government to borrow billions from future tobacco bond revenues and schools just to balance the books. At the same time, state funding for schools fell far below the rate of inflation, desperately needed transportation projects were deferred due to a lack of state matching dollars, and the state still could not escape a structural deficit that threatened continuing budget fights long into the future.
Gov. Dayton’s budget puts the state on a firmer financial foundation and invests much-needed new dollars in areas where it counts. It’s a budget for grown-ups, and it’s an excellent starting point for legislators as they work to craft the state’s spending plan for the next biennium.