February 19, 2007
Anti-tax Distortions Spring Eternal
Last week, talk radio host Jason Lewis served up a “quick reminder for tax-and-spend apologists” in the state legislature. Conservative apologists have echoed similar talking points ever since Ronald Reagan was a governor, so I’m not sure why any legislator needs a reminder.
An exorcism would be more in order.
Still, since the Pioneer Press printed commentary normally spewed over the airwaves, it’s easier to capture his deceptive arguments and show how they work. Let’s take a few of the most typical distortions we’ll hear for the rest of the legislative session.
According to Lewis, Governor Pawlenty’s budget is “spendthrift” and Democrats are poised to make it worse. Taxes represent a terrible restraint on the private sector. If only we could cut taxes even more and shove government out of the way, we’d have utopia in Minnesota. Or at least some of us would have more money to spend on really important stuff instead of other people’s kids.
As a matter of fact, when you look beyond Lewis’s cherry-picked figures and his invocation of discredited theories, you’ll see a different picture — one that legislators of both parties should consider very carefully in the budgeting session ahead.
Tax cuts don’t produce economic growth. Conservative commentators like Lewis have so persisted in trumpeting this myth — and its mutant variations — that you may actually believe tax cuts generate more tax revenue. Yet current and former chairs of President Bush’s Council of Economic Advisers, the tax expert in his Treasury Department and the Congressional Budget Office say it doesn’t work that way. The latest revenue surge Lewis cites, for example, is the product of a predictable post-recession cycle. However, the last time such a spike occurred, it came on the heels of a tax increase.
Tax cuts have not helped Minnesota, either. Throughout most of the “high tax” 1990s, the state’s economy outperformed the nation as a whole by nearly 1 percentage point of annual per capita income growth. That’s a whopping difference. However, in the last eight years — exactly coinciding with the period in which we lowered our taxes substantially compared with other states — we have become an average economy.
This isn’t just true of Minnesota. The Center on Budget Policy and Priorities studied 16 tax-cutting states, including Minnesota, and found the tax cuts failed to improve those states’ fiscal and economic health. In fact, the big tax-cutting states generally faced larger fiscal problems, and have had worse economic performance, than other states that were more cautious about tax cuts.
Lewis wrongly calls state spending “runaway” — unless he means to describe how relative state spending has been in retreat since 2001. He points to total dollars spent by state government, ignoring the state economy’s increasing capacity to pay, plus factors such as population growth and inflation that drive increases. Measured properly — total state and local taxes and fees as a percentage of total income earned by Minnesotans — the price we pay for government is about 1.5 percentage points less than for most of the 1990s. And Governor Pawlenty’s budget will try to keep it there.
He overstates Minnesota’s “onerous tax burden” by choosing the income tax per capita ranking that puts Minnesota sixth in the nation. On the measure that includes all taxes and fees we pay in the state, Minnesota ranks 16th.
Whether you believe spending should be higher or lower, setting an acceptable price of government we’re willing to live within would be a statewide discussion worth having. Then we could focus on getting the most for our money instead of fighting over tax cuts and increases.
He distorts who’d be affected by an income tax increase. Congratulations if you’re a young couple, each making a shade over $37,000 a year. Your household now ranks with Joe Mauer’s and Jason Lewis’s among the elite taxpayers who contribute more than 69 percent of the state’s income tax. Of course, Lewis has arbitrarily redrawn the household income line to include you with the wealthy and enlist your outrage against his hypothetical tax increase. If a real proposal comes up this year, however, it’s likely to target the real upper bracket of households earning $200,000-plus. These folks pay proportionately less of their incomes in state taxes and fees than middle-bracket earners, and many could agree that’s not fair.
That’s not his only trick to shelter the high earners. He brazenly uses only the income tax to measure state tax fairness — and bolster his theme that the wealthy are overtaxed — ignoring the heavier effect the other two-thirds of state and local taxes has on those with lower incomes.
Most Minnesotans can agree on one thing. We should not simply raise taxes. If more spending is called for to achieve results most Minnesotans want, the legislature should consider how any new money can be raised fairly, invested wisely, and managed responsibly with the rest of the budget.
Budget and tax matters can be complicated, and the anti-tax forces are counting on you to go for their sound bites. This is just a quick reminder to taxpayers and legislators not to buy everything talk radio hosts keep trying to sell.
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