I had the pleasure of having my editorial Wednesday rebutted by a local "hard-nosed Democrat" (his term, not mine), in which I'm accused of being a "good soldier" for Governor Pawlenty. Longtime readers of this blog will find that humorous, since I opposed the signing of the smoking ban, JOBZ, the health "impact fee", etc. Here are my reactions.

1. "The top 1% have loopholes." We all have loopholes. What's the mortgage interest deduction? The rich have more. They have a greater ability to shift where they pay taxes and when than the middle class does. All the whinging in the world won't change that. So I suggest not taxing income but taxing consumption instead. Not good enough for Beckfeld or Ellenbecker -- I'm just called a "good soldier." Forget whether the analysis is correct.

2. Beckfeld says, "He argues that we have just the right balance of taxes.". Nowhere did I say that. That's at least inattentive writing. More likely it's to try to pin the "apologist for capitalism" tag on me. Which I would have worn gladly if asked. But try to get the story right.

3. Beckfeld says, "He also believes that if we attempt to raise the taxes on the 20,000 richest Minnesotans from 8 percent to 9 percent to give all Minnesotans property tax relief, then they will flee to states that have little if any income tax or hire clever accountants and turn themselves into corporations." They have already turned themselves into LLCs, S-corps, etc., because they were avoiding the higher tax rate on C-corps (the corporate franchise tax.) So we already agree they try to avoid taxes, thus the estimates of how much money will be raised for property tax relief are overstated.

4. "It's clear that our governor shares these views." Can you find a shred of evidence to prove that? No offense to Gov. Pawlenty, but I don't think he's ever discussed tax elasticities and incidence reports before.

5. "Banaian and Pawlenty's mistake is that they assume the top 1 percent have no sense of community and that all they value is their own wealth; that taxes are the only reason to maintain a business in this state." Some will leave, others will not. That is true. My point is that the amount of property tax relief is overstated in two ways, one of which is tax shifting. The other, which I didn't make in the article, is that the way the PTR is written in, you wouldn't have gotten the money unless their budget actually balanced. If higher taxes caused a recession and money to flee, the government could not have transferred the LGA money. (This is irrelevant at this point as the tax bill appears to be dead. But just so you know, the income tax increase was a definite, the property tax relief was a maybe.)

6. "We will never be able to compete with the states he points to because they have no income tax. Through his argument, eventually the richest Minnesotans won't be taxed at all and the rest of us (middle class) will have to pay more." Actually, there are many great reasons to live in Minnesota. But those have to be weighed against the cost of paying an extra 10-15% in income taxes to make other people's property taxes go down, perhaps. I like beer, but at some point I have to stop because I have other things I need to tend to, like weight or sobriety or being able to function the next day at work. It's not all or nothing; Beckfeld shows an inability to think about things at the margin.

7. Ellenbecker (at post #24) suggests the 1-in-100 rich should pay 12.4% like the middle class does, rather than having the middle class pay 9.3%. So he's not for decreasing your taxes: He's for playing Robin Hood and expanding the welfare state. I'll save that note.

8. There are two ways to provide property tax relief. One is to take money from one group to give to another, as you are able. The other is to have local government spending so bloody much of our money! LGA is the crack that feeds the local spending addicts like Ellenbecker. Put those people on rehab, help them kick the habit. Pass real levy limits instead, and help local government get over its addiction.

Labels: legislature, Minnesota