As Session Starts, Will Dayton, DFL Raise Taxes on Minnesota’s Rich?
Or Is That Campaign Promise “Inoperable” Now That Democrats Have Control?
Pressure is on DFLers to raise taxes from people such as Deb Konechne, St Paul, and her daughter, Eliana Konechne Redfield. Click photo to watch video.
It’s the question of a session in which Democrats will control the governor’s office and both houses of the Legislature for the first time since the era of Gov. Rudy Perpich: Which Democrats are these; the ones who campaigned to win control in order to pass a Democratic agenda? Or the ones who want to stay in power by avoiding actions that might cost them the next election?
State Sen. John Marty, a DFLer who is among the most unabashed liberals in the Legislature, explains the party’s conundrum this way: “When we are in the minority, they tell us we can’t accomplish anything because we’re the minority. And when we’re in the majority, they tell us we can’t accomplish anything because we want to stay the majority.”
Protesters call for higher taxes
If their political “friends” now control the reins of state government, you wouldn’t have known it from the chants of the welfare rights protesters on the Capitol steps. They called on the Legislature — as they do every year — to stop giving away the store to the wealthy and to increase support for the working poor, the children on welfare, the jobless. The protesters were sticking to their platform. The question is whether the DFL will do the same.
“Governor Dayton, please stick to your guns.” said activist Eric Solovjovs. “Raise the taxes on the rich. Help out the middle class. Then everybody is going to gain.”
Activist Mick Kelly agreed. “It’s vital that working people speak up and put demands on Governor Dayton, on the Democrats in the legislature and make it absolutely clear that the situation as it exists cannot continue.”
The discussion about how Democrats will behave now that they have unchallenged control for the first time in a generation has raged since the Nov. 6 election, fueled by the apparent unwillingness of Dayton and DFL leaders to claim a mandate from their victory, and word that Democrats were being urged by leaders to move slowly. That caution was evident on the day after the election when Dayton and DFL leaders held a press conference that was notable not for what they said, but for what they didn’t say.
Dayton plans to offer a significant tax reform plan this year — his budget proposal is due later this month — but he refused to specify how much he’d raise taxes on the richest two percent of Minnesotans — a signature promise of his 2010 campaign for governor. Dayton translated his campaign promise into a 2011 proposal to require the wealthiest Minnesotans to pay higher taxes in order to reduce state deficits, predicted to reach $1.1 billion this biennium. Dayton’s proposal, presented to a Republican-led Legislature that refused to consider it, was to raise income tax rates to 10.95 percent and tack on a temporary surtax on the very wealthiest, which would nearly have doubled their top tax rate for a while.
But at the post-election press conference, Dayton said he wasn’t ready to unveil a specific tax plan. His legislative allies, incoming Sen. Majority Leader Tom Bakk, and incoming House Speaker Paul Thissen, also avoided the issue. Bakk, in fact, told reporters that he had reached out to the state Chamber of Commerce, a fiscally conservative organization that strongly opposes tax hikes. In the wake of compromises that President Obama struck with Republicans in Washington, D.C., to avoid “the fiscal cliff,” progressives in Minnesota openly worry that Governor Dayton, too, might backtrack on his pledge to raise taxes on the rich.
John Marty believes that the DFL must keep its promise to raise taxes on the wealthy. “I don’t want to soak the rich, I’m just concerned that we’re drowning the middle class,” says Marty. “When lower-income people are paying a higher rate of their household income in state and local taxes than those at the top end are, we have to question why we’re doing it this way.”
Republican efforts over the past decade to “shrink government” by cutting tax revenues radically changed the state’s traditional tax structure, shifting a much greater proportion of government costs from income taxes, which are considered to be a progressive method of taxation, to property taxes, which are far more regressive. If Minnesota’s budget were a three-legged stool, it would be so lopsided by now that it couldn’t stand up. That’s the metaphor that Dayton’s Revenue Commissioner, Myron Frans, uses to explain the imbalance in the present system. There are three primary sources of state revenue: the sales tax, the property tax and the income tax. Those three “legs” used to be balanced, Frans says, with each one equaling approximately one-third of the total. In 1999, for example, property taxes brought in 30.4 percent, sales taxes equaled 34.7 percent and income taxes equaled 34.8 percent.
“Fast forward to 2010,” says Frans, who holds up a comically lopsided stool at his public talks about taxes. “The income tax comes down a little bit to 33.6 percent; the sales tax is down to 26.6 percent, (but) the property tax is now almost 40 percent. We’ve been relying more and more on property taxes to fund local and state government, and less and less on sales tax and income tax. The governor would like to see these three legs evened out, over time.”
“Over time,” might turn out to be a key phrase here. If the DFL chooses to go slow on tax changes, they have to worry about losing their majority before real changes can be implemented.
According to Frans, Dayton’s plan to raise tax rates on the top two percent of Minnesotans would raise about $300 million over the biennium. But that would account for only 27 percent of the $1.1 billion budgetary hole. So what to do about the rest?
“If we went back to the tax brackets we had in the late ’90s, that would more than resolve the deficit and would enable us to begin moving forward on education funding,” says Marty. “The wealthy folks who would be paying more money would actually benefit from (a higher tax) because they’d have safer communities, a better-educated workforce…people are willing to invest if they feel two things: That the money is fairly collected and wisely spent.”
One influential opponent of a return to a more progressive tax system could be the Minnesota Chamber of Commerce, which members of both parties seem to be courting. The prospect of DFL politicians catering to the chamber doesn’t sit well with many traditional Democrats, including University of Minnesota Prof. Hy Berman, a labor historian and adviser to the late Gov. Perpich.
“The Chamber of Commerce has one objective in mind only,” says Berman. “That is to keep taxes as non-progressive as possible to benefit upper-income earners. Why DFL leaders are beholden to the Chamber of Commerce is beyond me.”
If Dayton sticks to his promises on taxing the rich, Berman says, his most important allies won’t be in the legislature, but in the trenches — like the protesters who greeted the Opening Day of the Legislature on Tuesday. DFL leaders, he says, should pay more attention to their grassroots…
“The organizations that motivate people. They are the ones that have to generate the grassroots support that would enable Gov. Dayton and the DFL legislative leaders.”
One group that might give Dayton support is the Joint Religious Legislative Coalition (JRLC), which advocates for fair taxation and social justice issues in Minnesota.
“We’re fond of talking about stewardship, pledging a portion of what we have for the good of the community,” says JRLC director Brian Rusche. Taxes are “what we pay to have the kinds of public services and infrastructure that we can rely on. We look at the state’s budget as a moral document. It starts with teaching people to be grateful, to know the myriad of things that support us.”
On the steps outside the Capitol Tuesday, the message from the grassroots was clear, where Deb Konechne and her 8-year-old daughter, Eliana, of St. Paul, braved the cold to carry a sign welcoming legislators arriving for the DFL’s big moment as Democrats took control:
“Tax the Rich,” it said.
