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A PROMISE TO LOWER TAXES is one of the best lines in a speech that candidates can deliver this year. The impulse to make such promises is fed by the fact the state budget is bloated with a surplus, and polls show taxes are among the top issues of concern to voters. The applause such promises get is fueled by the fact people are feeling good about the economy and suffer less anxiety over job security.
The economic reality being portrayed by candidates is based on current budget projections that have produced a revenue bonanza for many states, including Minnesota. Mark Dayton says it puts candidates in an enviable position this election year, but he also recognizes the need to keep a dose of reality in mind.
Dayton: We're all operating on what I'd call "La-La Land Economics." We are taking the Department of Finance's projections, which are the ones the legisislature and the governor use, and which are projecting right now a $530 million structural surplus the first year and a $570 million in the second year.But in calling for his own brand of tax breaks, he cautions the surpluses that make them possible could disappear if the economy suffers a downturn.
Dayton: I think that evaporates about as quickly as a snowball in Minnesota on the Fourth of July. At that point then, a lot of what I or anybody else is proposing to do in terms of tax reduction probably has to be put on hold. Surpluses are gone, expenses go up, people are going to be laid off, more people would be going back on welfare, revenue projections would decline, and you're going to have to make hard decisions about cutting spending.But Dayton is as much of an optimist as the other gubernatorial hopefuls in an election year.
His tax policies and education funding proposals are inextricably linked. He wants the state to fund education 100 percent. That means he can propose cutting state property taxes.
Dayton: I think the property tax is a terrible tax across the board. It's not based on profitability for businesses. It's not based on income or ability to pay for renters and homeowners, and my proposal, which would take the K-12 education funding off of the property tax on the operating side entirely, would reduce the total property tax burden of Minnesotans by over 40 percent.But Dayton isn't shy about telling voters where he's willing to increase taxes. He would replace the lost education revenue by shifting the tax burden to business.
Dayton: With the objective that businesses would continue to pay approximately the same proportionate share the costs of public education as they have in the past.Dayton also proposes broadening the sales tax. But he recognizes that the sales tax arguably falls hardest on the poor. That's why he'd extend the increase to services such as advertising, accounting, and legal fees.
Dayton: In a way, that business would pay for a share of those, and those individuals who have higher levels of disposable income would take care of the rest.Experts warn candidates against getting too comfortable and promising too much in spending. But the political will to mine the money for things like education is strong, and taxpayers can't resist promises of new ways to line their own pockets.