Monday, May 14, 2007

Rejoining Clark 

As one should expect, the Times runs a rebuttal to state Rep. Steve Sviggum's editorial (the Times doesn't seem to have it archived, so here's the Winona Daily copy) from Senator Tarryl Clark. (Private to SCTimes -- does she pay you guys by the headshot? That picture gets a lot of use.)

Former Minnesota House Speaker Steve Sviggum recently wrote a pretty nasty commentary that appeared in the Times. ("Another agenda emerged when Democrats took office," April 30.)

It's certainly OK for the former speaker to disagree and disseminate his views, and I'll admit that the temptation is there to respond in kind by using the same tactic of taking proposals out of context, changing their meaning and passing them off as fact. But that wouldn't be very constructive.

Well, this cleverness extends to calling a tax increase a tax swap, when the money for the property tax relief is deferred to the last day of the next biennium, and could be taken back if the DFL's haul doesn't provide enough booty for its constituents. As I said Saturday, it's a definite increase in return for a maybe decrease.

I'll skip the two paragraphs of her declaring her party's mandate. I will only note that a tax increase was not in that list. She then proceeds to try to read history, at which she fails.
When taxes were cut at the end of the 1990s, mostly for folks at the highest income levels, the question was what that action would do to Minnesota's quality of life.
As Gary points out, taxes were cut across the board, reducing the marginal rates at all levels by 0.3%. Tax collections went down, but that's largely because of the recession of 2001-02. Hold onto this point, gentle reader, because it comes back again and again. The DFL is comparing data across a recession, and over a period of structural change that blows an ill wind on Minnesota regardless of who's in office.

I took a little time this morning -- being as classes are out and I've got a couple days of rest before diving into the book I'm writing -- to look not just at the most recent Tax Incidence Study but at all of the others as well. Here's the set, if you want to whip, chop and puree your own data. The data before 2000 isn't as complete based on my quick reading, but here's what I find:
What explains these changes? My belief is that this is a direct result of the bursting of the Clinton/Greenspan stock market bubble in 2000.

So what happened to the individual income taxes paid by the sixth decile (in 2004, the family making between $37,560 and $47,192)? Between 1996 and 2004 in two-year increments you get effective income tax rates of 3.3%, 3.5%, 3.3%, 3.2% and 3.0%. Since 1998, the effective income tax rate on middle income households went down. So whose taxes were cut, anyhow?

(Here's the data I used in an Excel file.)

Senator Clark continues:
Advocates of the tax cuts, such as then-Speaker Sviggum and then-House Majority Leader Tim Pawlenty, said it would spur business development and build jobs.

Instead, the opposite has happened. Minnesota went from having the fifth-highest rate of personal income growth during the 1990s to the 32nd highest from 2000-05.
Bummer for them, the stock market burst and some guys aimed planes at buildings. At the same time, the decline in the manufacturing sector began in earnest across the USA, as well as in Minnesota. All because Sviggum and Pawlenty advocated tax cuts? Hardly; it started well before then.
Job growth, which grew at an annual rate of 42,000 workers during the 1990s, is down to about 28,000.
Which is consistent with national averages.
It also triggered an enormous state budget deficit when Gov. Pawlenty and legislators took office in 2003.
Right, the stock market crash and 9/11 had nothing to do with it.
In response, they raised scores of fees, froze special education payments, and slashed health care and payments to cities and counties.
Rather than take more money from the people who just lost $6 million in income. Do you hate people richer than your family, Senator?
They also engaged in some egregious budget sleight-of-hand by shifting accounts and by instituting a new rule where inflation would not be factored into future budget forecasts.
I have no idea why they would think inflation should be factored, as I have said before. As to egregious budget sleight-of-hand, I believe they borrowed money against the reserve set aside for a rainy day, and Tarryl, it was raining hard. And that money has been paid back, and even then there is a $1.1 billion surplus in the current budget -- no inflation needed -- that is not being paid back to Minnesotans. Some of us think that's a tad egregious, too.
The upshot of the tax cut and subsequent budget "fix" has resulted in shifting more of the price of government from wealthy Minnesotans to the middle class.
I have always been annoyed by this term "price of government": Prices are set in a market as the result of bids and offers by buyers and sellers. What is the market in which the "price of government" is set? In fact, it is in the Legislature, which continues to demand services in order to attract votes and then figure out how to make people who won't vote for them anyway to pay for it. The price has been driven up by local governments insisting that they must spend what they spend -- in their glee to get developers to create new property tax base they build exit ramps off freeways then whinge that the state didn't subsidize the ramps -- and wait for a compliant Legislature to come around and provide them with LGA, the methadone treatment of the tax-and-spender.
Now, middle-income earners are paying proportionately more of their income to fund government than the very wealthiest.
This despite the fact that the rich are paying a higher share of the income tax in 2004 than in 2000!
We're trying to change that. And we're trying to effect that change while respecting the institutions voters elected us to serve in and the viewpoints of people regardless of their political affiliations.
What you are trying to change is from whom you will confiscate income and to whom you will spread your benefits to satisfy your political base. And you're more than willing to misrepresent the facts about taxes in Minnesota to do so.

Pogie must be pleased with his little lieutenant. Have a nice time driving us to a special session, you two.

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