Pawlenty’s tax policy ignores budget realities

Short-term solutions for a long-term problem will not solve Minnesota’s deficit.

by Jennifer Bissell

Tough economic times bring tough economic decisions, and MinnesotaâÄôs $1.2 billion budget deficit is no exception. In order to resolve these issues, Gov. Tim Pawlenty has made drastic and deep cuts across the budget, consistent with his âÄúno new taxâÄù policy. Among the cuts were $250 million to local government aid, $347 million to health and human services and $47 million to higher education institutions, including the University of Minnesota. In large part, the economic downturn is responsible for the deficit, but PawlentyâÄôs âÄúno new taxâÄù policy has also played a role in the stateâÄôs diminishing revenue. According to think tank Minnesota 2020, PawlentyâÄôs âÄúno new taxâÄù agenda has significantly reduced public investments needed for future growth. Coinciding with the Pawlenty era, Minnesota 2020 also says there has been an overall reduction in state performance indicated by a decline of both employment and income rates relative to the national average. ItâÄôs a vicious cycle. The budget is unbalanced so Pawlenty cuts programs, the state loses the growth those programs generate, and the next budget is even more difficult to work out. To resolve the budgetary crisis he has helped create, Pawlenty has continued to follow his same failed approach by cutting necessary programs and by using unsustainable gimmicks such as payment deferrals. According to a study by the National Conference of State Legislatures, Minnesota was second to Alaska in reliance on one-time fixes to balance its most recent budget. Additionally, because there have not been long-term solutions, the budget is projected to grow by more than $2 billion in the next biennium. PawlentyâÄôs approach isnâÄôt just an abstract accounting problem; it negatively affects the lives of individuals throughout the state. Those with the least suffer the most, as many of the programs cut assist the poorest and the sickest. General Assistance, for example, is a program that gives $175 a month to people who have nothing. It has been wiped out. General Assistance Medical Care, a program that provides health insurance to more than 77,000 low-income residents, has also been cut. Though taxes wonâÄôt see an increase, certain fees have to increase to maintain services. Marriage licenses, birth record replacements and pheasant stamps all increased by more than inflation. Once again, this hurts the poorest by creating a regressive economic system in which the poor pay a disproportionate level of income for vital public services. One could coldly say those using the programs should be the primary investors, but this ignores the realities of individualsâÄô ability to pay. PawlentyâÄôs âÄúno new taxâÄù policy is an overly rigid manifestation of well-accepted economic theory: One should keep taxes low to foster economic growth and job creation. However, while this approach holds merit, when taken to the extreme position Pawlenty represents, it ignores the need to invest in the future. There is a balance between keeping taxes low and funding necessary programs. The cuts to the higher education programs are a primary example of how the current slash-happy approach ignores the need for investment. Aid to the University of Minnesota has been cut by $39 million, and according to University President Bob Bruininks, the loss in state aid will likely lead to hundreds of layoffs and an approximate 15 percent tuition increase. These potential tuition costs are not just painful for students; they are a real problem for our economy as well. Growth and Justice, another Minnesota think tank, explains that if the current downward trend in the number of post-secondary degrees continues, MinnesotaâÄôs workforce will eventually lose its competitive advantage. In fact, the think tank estimates that within two decades there will not be enough skilled workers to maintain MinnesotaâÄôs economy or quality of life. Public investment is the key to a stateâÄôs economic performance. When we cut programs, we weaken our performance. When we limit access to education, we limit our workforce. When we ignore the needs of the poor, we ignore their potential worth. When we cut off care to the sick, we show a maligned priority in values. To take care of each other and the future of our state, cuts are not the long-term solution. A balanced approach to taxation is, whether we like it or not, the only responsible action. According to the Department of RevenueâÄôs 2009 data, the wealthiest 10 percent in the state pay only three-fourths of their proportional share of state and local taxes. Additionally, Mark Dayton, who is campaigning for governor, estimates that by taxing the top 10 percent at a flat rate proportional to the rate everyone else pays, Minnesota would raise $3.8 billion in new revenues. If the wealthy are not paying a fair rate, it seems only reasonable to raise taxes on the upper bracket if it means a stronger, more sustainable budget and state. A stateâÄôs budget is a reflection of its values. Do we value growth and progress? Refusing to generate revenue when it is needed would suggest not. Are hospitals, schools and state upkeep important? What is the value of a city official, park or nursing home? How much is the state worth, and how much are we willing to pay? Minnesotans can only hope that once Pawlenty is out of office, his mess will leave with him. Jennifer Bissell welcomes comments at [email protected].