Minnesota’s tax policies matter a lot to the lives of state residents and companies that do business here.
Reform that brings more fairness and simplicity to Minnesota’s tax policies are being sought by Gov. Mark Dayton.
That’s the message brought last week by Minnesota Commissioner Myron Frans, supported by northern Minnesota lawmakers Sen. Tom Bakk and Rep. David Dill, to a luncheon sponsored by the International Falls Area Chamber of Commerce and the city of International Falls.
Bakk and Dill are seeking election to the Senate District 3 and House District 3A positions representing Borderland. They face candidates Jennifer Havlick in the Senate race and Jim Tuomala in the House race in the November election.
Frans spoke in the Falls as part of a tour of northern Minnesota to talk about tax reform and to gather reform ideas and input for Dayton.
“You see the problems, you see the solutions,” Frans said Thursday to the audience. “We’re all in this together. This is not a Democrat or Republican issue.”
Frans said Minnesota has experienced budget deficits in eight of the last 11 years. The deficit has required solving immediate budget problems, and the state must move away from continual budget deficits by finding a larger, ongoing solution, he said.
“How do you have a more fair, more simple tax policy that promotes economic development?” he asked.
Frans said Dayton has ordered tax reform that involves creating more jobs and making the state more competitive, increasing efficiency and effectiveness of government, and creating a tax system that is more fair.
“I think tax reform has a big place in the governor’s plan,” he said.
In a power point presentation, Frans outlined how taxes influence the number of jobs in the state. He also said the tax burden has shifted in recent years with middle class Minnesotans paying a larger share of Minnesota taxes — 12.3 percent of their annual income to state and local taxes. The top 5 percent of earners in the state pay just 10 percent. He also said property taxes are playing an increasingly larger role in tax collections in the state.
(See Frans’ full presentation at http://www.revenue.state.mn.us/tax_reform/Pages/Tax-Reform.aspx)
Of the $16 billion in revenue collected by the state in 2010, Frans said $11 billion was excluded from taxes because of exemptions, credits and loopholes.
That means 40 cents from every $1 collected “was off the table” and the other 60 cents were used to fund education, health care, public safety and other needs in the state.
He referred to the ideal balancing act of taxes in a three-legged stool analogy, with property tax, income tax and sales tax collecting the same percents. However, he said, in 2010, the stool was unbalanced with property tax making up 40 percent of the collections, income tax 33 percent and sales tax 27 percent.
The needed tax reform won’t come easy, said Frans, because of the many special interests that will fight to retain those exemptions.
Frans responded to questions about taxing the wealthy more, saying that while it would help solve deficits, it’s not the only solution, adding that there simply are not enough wealthy people to make up the difference needed.
Bakk said he expects to see the next Legislature consider expanding the sale tax to other items, but he said public confidence will be needed for acceptance.
In addition, he suggested that it is likely that the governor may suggest a fourth tier of tax structure for the wealthy.
Dill said people have lost touch with what taxes are about. While few people enjoy paying taxes, those who don’t like it should embrace tax reform. He added that anyone who drives on roads, attends public schools or enjoys public safety benefits from taxes and should understand why they are necessary.
