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Minnesota 2020 Journal: The Clear Choice before Us

August 27, 2010 By John R. Van Hecke, Executive Director & Fellow John Van Hecke

This fall, Minnesotans will elect a new state chief executive. Minnesota's challenges will not disappear as the State Capitol's doors swing closed behind departing Governor Tim Pawlenty. Minnesota, more than at any point over the past eight years, faces a profound policy direction choice. Will Minnesotans continue failed, conservative "no new taxes" policy or will we embrace a new, better, progressive direction?

This is not a rhetorical question.

After eight years of cost-shifting by the state to counties, cities and school districts, buttressed by no state tax increases, Minnesota still faces a projected $7 billion budget deficit. State revenue sharing cuts have compelled local government units to decrease budgets, cut program allocations and increase property taxes. With the new state government's seating in January 2011, Minnesota will likely experience more of the same.

We cannot tax our way out of a $7 billion budget deficit anymore than we can budget cut our way out. Only a balanced approach -strategic cuts paired with revenue increases- will balance Minnesota's budget. For the past eight years, under Governor Pawlenty's public policy leadership, Minnesota has disproportionately tried to cut its way clear.

Eyeballing the state's $7 billion budget deficit and my property tax statement, I'd say that this approach hasn't worked especially well. I'm unwilling to declare it an abject failure but, like Pawlenty's much ballyhooed JOBZ economic development initiative, it has overwhelmingly failed to improve Minnesota's situation and, arguably, has made things worse.

As Minnesota 2020's research has revealed, state cost-shifting has resulted in increased property taxes. With the State of Minnesota unilaterally discontinuing its progressive and wildly effective state revenue sharing program, cities, counties and school districts have turned to the only revenue generating source available to them, property taxes, to increase some but not all of the lost revenue. As a consequence, local services like police and fire protection, street and highway maintenance, and library and community center access have been reduced. People are paying more and getting less.

The "Minnesota Miracle" was a 1971 legislative package effectively extending the state's broad taxation authority to cities, counties and school districts via revenue sharing. In return for increased state taxes, property taxes were cut, achieving a more progressive, fairly distributed services funding structure. Prior to this moment, cities, counties and the then-recently constituted independent school districts had to fund growing post-World War II demand for public services through property taxes. This proved to be a regressive, burdensome and inefficient revenue generating mechanism.

The name -the Minnesota Miracle- might have been new but the idea had been kicking around for a good ten years prior to the bill's passage. Central to it is the notion that a shared, progressive taxation structure achieves a greater result at lower, fairer cost. Now, following 30 years of organized conservative policy advocacy and communications work, Minnesota is unilaterally withdrawing from this efficient mechanism.

 It's time for progressive policy. It's also time for hardcore tax restructuring, expanding Minnesota's base of taxable economic activity not because I'm in love with revenue expansion but because Minnesota's economy has changed. We're not making Whirlpool washing machines on St Paul's east side anymore but we are educating Metro State University students for an information skill-intensive world on that exact site. Those students are fueling the smartest, most capable work force that Minnesota has ever produced. It's time to change with the times.

The conservative policy answer to every question is disarmingly simple: cut taxes. Regardless of economic circumstance, conservative orthodoxy offers the same answer to every problem. Wielding a hammer, conservative policy makers happily see every revenue-generating proposal and every community budget as a nail to be beaten into the submission.

Despite eight years of poor Pawlenty policy outcomes, the conservative plan to move Minnesota forward proposes more of the same. It's not working now, it won't work next year and, with a little more time, conservative "no new taxes" policy will permanently reposition Minnesota to our nation's lower-middle economic performance ranks.

Minnesota excels when Minnesota public policy reflects our shared values of education, hard work, and strong communities. We triumph by focusing on what really matters: strong schools, affordable health care, robust transportation infrastructure and effective economic development. The choice between tired conservative policy and a better, smarter progressive vision is striking. Minnesota needs to change now, more than ever.

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