Pawlenty's Gamble

These were the “positive” ideas that were brought forth: (Note that I put the word positive in quotations.)

Cut to the Corporate/Business Tax Rate

This is one of those great ideas, bad timing type of situations. When the economy was growing, venture capital and investment dollars were flowing, and state revenue was up – that is when you propose a cut to this type of tax rate. Reason being is that with any tax cut - there is going to be an initial hit to state revenue – but hypothetically over the long run it encourages more businesses to hopefully want to do business within Minnesota to take advantage of that break.

Right now we have one the largest corporate tax rates in the country at 9.8%, with only Pennsylvania and the District of Columbia being higher. By dropping it down to a Flat Rate of 4.8%, it would put us as the 5th lowest in the country.

But – we don’t have a booming national or state economy. The venture capital is almost all but dried up and gone, creating one of the worst capital markets that we have seen in decades – oh and the state has a massive deficit already. So you take a negative number – and you would be making it bigger into the negative.

We are not the federal government. Gov. Pawlenty can’t just tell the Treasury Department to print more money, and borrow cash from overseas. We can’t just dump the deficit and make it worse because the Governor knows it will get better later on. But then again – maybe the Governor is overusing a popular phrase made by our 44th President – Yes We Can! Or in his case – I can.

So again – this is a great idea – just crappy timing.

Wage Freeze

Agreeing with this idea may get me in trouble with my friends – and it technically would effect me as well. But here is why this has merit. By putting a freeze on state government wages, and maybe even any government body that accepts state cash, this would mean local and county governments too; you eliminate the need over the next biennium to budget for a fluctuation of wage increases. You then know exactly what to budget for when it comes to wages for the period of the freeze.

This is going to be unpopular with the government employees that have union contracts coming up for renegotiation within the next two years. Because there really isn’t any thing that will get negotiated, it would be a set in stone freeze.

Even President Obama said that everyone is going to have to give a little over the next couple of years, to help us out of this crisis – and this may be the right time and the right idea to help get the state’s deficit under control. It’s not a huge help – but every baby step in the right direction is going to help.

Full Sales-Tax Exemption for Capital Equipment Purchases

This is borders again into the great idea – bad timing type scenarios.

No one is going to tell you that not having to pay 6.5% on the purchase of brand new farming, construction, or mining equipment is a bad thing. They are going to tell you that it’s a GOOD thing.

But – again this is lost revenue to the state, in a time when we NEED revenue. The thing where this differs from the cut to the corporate tax rate – is that this doesn’t have a direct correlation of creating more jobs. Where the drop in tax rate, will encourage more businesses to come to Minnesota (hopefully), thus creating jobs. Making it cheaper to purchase equipment doesn’t increase revenue; it just perhaps makes the purchase less painful to the business itself. Thus the state will most likely not getting anything out of this measure – other than maybe helping inter-state business retention – but I would say on a very small margin.

Again if we were in a different economic situation nationally, this idea paired up with the lower corporate tax rate would be creamy butter to a great piece of toast. But, that just is not the case right now.

That is it – just three good ideas out of the bunch in my opinion. Not saying that the rest are all bad, just not good. And right now we need as many good and great ideas we can get.

So now I am going to cover the ones that I feel are just BAD juju – stuff that I hope the state legislative body will shake a big stick at and make go away.

Tax Credits and a “Green JOBZ”

This is political fluff that makes it look like we are interested in fixing something.

I hate to say it but $50 Million dollars in tax credits being spread across one of the nation’s largest state GDP just doesn’t go very far. I think it ranks right up there for effective as a fart in the wind. Here is why I say that; there are already tons of federal programs for tax incentives, and the way our future President and congress are going – there will be plenty more where that came from. Of course without details I can only speculate, but I think it would be a pretty good guess that the incentives will be just like federal, tough as hell to get, and not “reimbursable”. So although yes you are eliminating the tax burden on a small minority of businesses to the state – guess what – after they zero out their state tax burden – the rest of that incentive is gone, with Federal Taxes still to be dealt with.

The only way I see this being salvaged, and have it turned into a good idea is by doing the following. Take that $50 Million in tax credits and give it to any small business that has started its operations within the last two years, or that will be starting its business in the next two, and does less than $1 Million in Gross Revenue. This therefore gives the newer small businesses across the state a slight bump, and encourages other newer small businesses to start and move forward. I’m not an economist, nor do I have access to the required numbers to figure it out – so the proposed $50 Million may not be enough to cover the businesses that I have listed here – but I think you get the idea.

Green JOBZ – Don’t know if anyone noticed but when oil prices are the lowest they have been in almost five years, with regular gasoline being at an average in the $1.80/gallon range – the amount of people jumping on the Green Friendly ticket get to be limited to tree huggers and ethanol producers.

Renewable Energy in the state of Minnesota has hit a large speed bump. Ethanol is on the decline – and may have all the nails in the coffin with the emergence of electric hybrids, and the strong push by people like T. Boone Pickens for Commercial Natural Gas, or the Automotive Industry for a Hydrogen Fuel Cell/Hybrid. Short of the Fed making all gasoline blended at a mandatory E-30 or more, I just don’t see the ethanol industry being any more than a passing craze in the next 5-10 years – with President Obama most likely going to be put in a position to where he has to rescind last years RFS increase.

There is a better way to encourage the increase in wind and solar energy jobs – and that is through a new statewide mandate for renewable energy, at a higher amount than what Governor Pawlenty has already set forth, this requires a higher demand for electricity produced from renewable energy sources – and doesn’t have a direct cost to the government.

There were obviously more to his plan – but they either are fluff or are outside my comfort zone to talk about (Education / Teachers / College) as they are important just as of this writing not my strong suits for conversation.

I pray that by the Governor having to work with our elected State Representatives and Senators – that they will come to a collective “bargain” that makes sense for the entire state that not only gets us out of a deficit by the end of the next biennium, but lays the ground work for a growing and sustainable Minnesota.