Two bills that have recently earned Gov. Tim PawlentyâÄôs signature âÄî one to cut spending and another to cut taxes âÄî illustrate the wrong way to deal with a financial crisis and a budget deficit.
First, the spending cut bill. These times call for tough budget-cutting decisions, but the state government has made the wrong ones. They will cut $47 million from public education, the maximum amount allowed under law in order to retain federal stimulus funding. Further, the bill shifts the budget burden onto local governments by cutting over $100 million in aid to them. The more egregious bill is the tax-cutting bill. As a general rule, when one is trying to solve a $1 billion deficit, one should not significantly cut taxes, since doing so decreases revenue. Of course, a major recession like the one we are currently experiencing demands that public officials make different decisions than they might normally, but $100 million in business and investor tax cuts (meaning the tax cuts will not go to citizens) erases a significant portion of the spending cuts in the billâÄôs twin. At least spending cuts push the budget in the right direction: toward resolving the deficit. More shocking is who will get a large portion of the tax breaks: the Mall of America and Ford, two very large businesses. How is the state paying for these breaks? Eliminating a $30 million annual gas tax credit for the poor. The prospect of Ford closing its truck plant in St. Paul should not hold the state legislature and the budget-balancing process hostage. The state legislature, desperate to keep FordâÄôs business, has taken money from the pockets of the poor âÄî effectively, increasing their taxes âÄî in order to pay for a handout to a big corporation. By threatening to leave, Ford can coerce better and better deals (i.e. more and more handouts) from the state. DidnâÄôt Americans establish that they were opposed to corporate welfare at the expense of the average citizen when the federal government bailed out the financial industry in 2008 to overwhelming opposition? And does the Mall of America really need state government funds to expand even further? Tax credits for hiring make sense, and so do certain other tax-cutting measures in the bill, but handouts to big business that increase our deficit do not. Together, these two bills ease the pressure of the financial crisis for the biggest businesses while shifting the burden to those who can bear it the least: the poor, students, and already-strapped local governments. Eric Murphy welcomes comments at [email protected]