A somewhat gimpy Gov. Mark Dayton, walking gingerly after recent back surgery, threw down a challenge Tuesday to the “powerful opposition” he said he expects to resist his budget plan for the 2014-15 biennium, which includes a 2-percent tax increase on Minnesota’s wealthiest 2 percent of taxpayers.
After a decade of budgetary shell games when political power was wielded by a Republican governor (Tim Pawlenty) who had tied himself to Grover Norquist’s “no new taxes” pledge, and by a GOP majority that refused to deal with budget deficits except by kicking billion-dollar cans down the road, a governor of Minnesota calling for tax increases seems as rare as a talking mule. But there he was, Mark Dayton, unveiling what he called a balanced, fair and sensible “budget for a better Minnesota” that will strengthen the middle class, boost education spending, get a start on reducing property taxes and make January a week shorter so that July can be a week longer.
No, that last thing is not true. But the rest of it was all there during an 80-minute governor’s $37.8-billion budget roll-out that made some old-timers in the room remember how government used to operate in Minnesota before it was taken over by people who did not believe in state government. Dayton’s budget and tax plans, in reality, were so cautious and modest they might have come from the desk of Arne Carlson. They were hardly the radical proposals of a liberal tax-and-spender with no regard for economic reality. Instead, they were carefully crafted to do something that hasn’t been done in a long time:
At first glance, at least, they seemed to make sense.
No more “borrowing” from K-12 education by stealing hundreds of millions from today’s classrooms with a promissory note. No draining of rainy day funds and looking under state sofas for loose change to try to avoid billions in deficits. No tacking on of fees and licenses and forcing local governments to hike property taxes. And no more avoiding an inconvenient truth: It’s time for Minnesota’s richest citizens to pony up more to the state that supports them.
Even there, Dayton moved cautiously, calibrating his proposal and dialing it back to a modest point he might actually get through a DFL-controlled Legislature that is waiting to see how the wind blows. The man who made Tax the Rich the motto of his 2010 insurgency against the DFL establishment and rode to victory over the party’s endorsed candidate as well as victory over a Republican candidate who had been hand-picked by the wealthy to beat back socialism, labored mightily and came up with…two percent:
A two-percentage point tax hike on the wealthiest two percent of taxpayers.
Not exactly Off With Their Heads, is it?
Dayton’s plan represents a significant retreat from his 2011 proposal to raise taxes on the rich by a far heftier margin — three points up front, another three temporarily. But that plan had no chance to fly, given GOP control of the Legislature. The “two-for-two” plan Dayton is proposing now may actually be do-able. Still, it is likely to draw opposition from wealthy individuals, business groups and Republican politicians who demonize any and all income tax hikes as attacks on “the job creators” and claim that such increases will hurt efforts to improve the state’s economy. Dayton, who proposed a series of other revenue-enhancing measures, including a broadening of the sales tax and making business-to-business expenditures subject to it, did not raise any rabble Monday. Instead, he carefully argued and, with understatement, moved as gingerly as he stepped to the podium. It was, he said, a simple matter of fairness. The rich are not carrying their weight.
Middle income families, Dayton said, citing just the latest in a string of similar studies, pay about 25 percent more of their income for state and local taxes than do the wealthiest two-percent. Under Dayton’s proposal, that imbalance would be partially addressed, with couples earning more than $250,000 in taxable income (most in that category have gross incomes in excess of $300,000), paying a tax rate of 9.85 percent. As fair as that may be, Dayton told a crowded press conference in the Department of Revenue building that he still expects it will be “very difficult to achieve” his tax plan in the Legislature, even though both houses are controlled by his political allies in the DFL.
Dayton defended his plan as “a balanced approach, despite all the people who’ll come screaming now about how terrible it is.” And he challenged critics — from both sides — to examine the plan and find any spending cuts, or revenue increases, that should be included in the budget. Sounding already weary of hearing the expected criticism, Dayton said: “I don’t expect this to be popular,” while also saying that the voters, in last November’s election, had sided with his budgetary views by electing DFL majorities in the Legislature.
That’s Dayton’s trump card: He won the 2010 election. And he “won” the 2012 referendum on his leadership. He could, in the eyes of some, be pushing for far more than he is asking. And the DFL voters who support him may accept no less. The legislative session, he said, “will be an interesting five months.”
Dayton argued that the income tax systems at both the state and federal levels are “unfair, they’re inequitable.”
“Inequitable means somebody who can afford to pay more pays less, and
somebody who can only afford to pay less pays more,” Dayton said. “Entrenched interests who benefit from that…They are going to oppose these changes that are going to benefit the vast majority of people in this country. When that doesn’t happen, there’s some disconnect between government and the citizens they’re supposed to serve. It’s worse in Washington. It’s not going to happen in Minnesota.”
Dayton said his administration had spent the past two years looking for cuts that could be made to the state budget “without hurting people.” But some interests, he said, don’t share that bottom line concern.
“In the past,” he said, “I’ve seen people who pay nothing, or pay less than what they’d pay in a fair system — most of them oppose those changes…I’m not out to raise anybody’s taxes. I’m out to raise enough revenues to do what’s right for Minnesota. If somebody thinks it’s unnecessary spending, please tell me where it is. I mean that sincerely.
“But at least have the honesty and integrity to say, ‘We don’t want to pay another dollar more in taxes so make another cut to nursing homes.’ Be specific about who’s going to take the hit.”
At one point — one of the few moments of levity in a long and serious wonk-fest, Dayton noted that his sales-tax proposal would expand the tax to include clothing items costing $100 or more. To that, the scion of the Dayton retail store dynasty said, “A tax on clothing sort of goes against my upbringing.”
Below: Governor Dayton’s question and answer session with the press.
Minnesota Senate Majority Leader Tom Bakk and Minnesota Senate Minority Leader David Hann react to Governor Mark Dayton's budget proposal.