Archives for Budget

State Forecast: As Expected, Shrinking Deficit But We are Still on Spending Auto-Pilot

Posted by Kim Crockett on Monday, February 28th 2011

An AP Report published on Forbes.com reports that the projected state budget deficit will drop from $6.2 billion to $5 billion. “The Minnesota Management and Budget forecast says federal cuts in payroll taxes and a delay in higher capital gains taxes have improved this year’s economic outlook.”

Keep in mind that GOP leaders say the deficit is even smaller because the projected figure includes automatic increases in spending that they’d like to reduce (think of it as government spending on auto-pilot).

Former Governor Pawlenty says that the auto-pilot spending amounts to 27% of the budget:

“State government spending on autopilot is ridiculous and irrational. It is out of control and needs to be fixed,” Governor Pawlenty said. “With revenues projected to increase 5 percent, it is absurd that state government is on track for a whopping 27 percent jump in spending. That’s why the next governor and legislature should reform this broken process by passing my Spending Accountability Amendment so Minnesotans will never face this problem again.”

The amendment,which is still being considered, would cap the state general fund budget at the level of revenue actually received during the previous budget period.

Instead of auto-pilot spending, we’d have auto-pilot control. The need for such an amendment is a sad commentary on representative democracy but a pragmatic idea whose time has come.

category: Budget, Deficit, Kim Crockett, Limited Government, Tax Policy

Save Money by Publishing Online

Posted by John LaPlante on Thursday, February 24th 2011

Rep. Steve Drazkowski, R-Mazeppa and Rep. Ann Lenczewski (DFL-Bloomington) want to free local governments from the requirement that they publish legal notices in newspapers. They say it could save government money in these tight times.

Here’s the short description of HF162: “Political subdivisions authorized to publish proceedings, official notices, and summaries on their Web sites in lieu of newspaper publication.” Click here for the unofficial lengthy version, which states in part that a government unit ”must also make print copies of all published documents available at the main office of the political subdivision, any other government offices designated by the political subdividions, all public libraries within the jurisdiction, and by mail upon request.”

Finally, “the political subdivision must publish in a qualified newspaper in the jurisdiction and on the Web site, notice of the alternative means of publication.”

The state’s newspaper association opposes the law, according to an article in the Star Tribune. As well it should: The law brings a substantial amount of money to newspapers, who have enjoyed a revenue bump in the past few years from the increase in the number of mortgage foreclosures.

The Star Tribune mentions several points of opposition:

The elderly are less likely to be online.
Going to the library is inconvenient.
Cutting into newspaper revenue will mean fewer reporters on the street.

All are worthy points, and the costs of running legal notices in newspapers, while real, are not substantial compared with other costs, such as pensions for public employees. There’s also a reduction, if however slight, in the transparency of government actions. Still, costs should be considered, too: If maximizing coverage of government actions is important, why not require cities and school districts to run TV ads telling people about the “notices of the week?”

On balance, I’d say the requirement that governments still run a small announcement in local papers advising people of the availability of a longer notice is, while not perfect, good enough.

What do you say? Leave a comment below.

category: Blog Posts, Budget, John LaPlante

Should we pay 55% because 43% is an “unfair” low tax rate?

Posted by Kim Crockett on Wednesday, February 16th 2011

Governor Dayton and President Obama say yes; 43% is too low and is an “unfair” tax rate. Of course, they don’t think a 43% marginal income tax rate on working is a harsh, unfair punishment for working harder or longer. The Governor’s and President’s opinions are crystal clear. In their view, a whopping 43% marginal income tax rate is a giveaway to the rich.
Governor Dayton and President Obama propose increasing the marginal income tax rate for working on the highest income brackets to 55% next year from 43%.

The Dayton-Obama 2012 rates include 39.6% federal income tax, 2.9% Medicare, and 13.95% Minnesota income tax. The 55% combined marginal income tax rate is the result of a minor adjustment for some limited federal deductibility of state taxes under the Pease provision of President Obama’s budget.
The arguments for tax hikes are laughable once the people learn that the current combination of the top tax bracket’s federal and Minnesota income tax rates on working is already 43%!

Both executives’ budgets cleverly try to hide both the large combined effects of layers of federal and state income tax rates and the gigantic higher combined federal and state tax rates that they propose. The Governor and President don’t want the media to report that our current tax rates are high, and that they want to send marginal income tax rates skyrocketing. Both Governor Dayton and President Obama omit the proposed combined federal and state marginal income tax rates from their budgets. Governor Dayton always omits federal taxes paid and state and local taxes paid by Minnesotans to other states to skew his view of tax incidence. The existing tax code as a whole is highly progressive without any additional tax hikes.

Any honest discussion about these tax proposals must start with the fact that under the Dayton-Obama budgets the combined Minnesota and federal marginal income tax rate would hit 55%!

category: Blog Posts, Budget, Dayton, Deficit, Jobs, Limited Government, State Bankruptcy, Tax Policy

tags: Dayton