MPR: Who Gets the Money?

Who Gets the Money?
By Martin Kaste
January 29, 1999

Governor Ventura's budget has widened the rift between him and Republicans on the number-one issue of this legislative session: tax relief. Republicans say Ventura has reneged on his campaign promise to give the state's surplus money back to all the taxpayers. The Governor says he is giving it back, but he's also looking out for interests of middle-income Minnesotans.

THE SINGLE MOST IMPORTANT difference between Governor Ventura's income tax cuts and the Republicans' tax cuts is this: Ventura cuts the rate on the lowest bracket only; the Republicans cut the rates on the low, middle and high brackets. Republican Tax chairman Ron Abrams says an across-the-board income tax cut is the fair thing to do.

Abrams: When you take a look at Minnesota in comparison with other states, we have one of the most progressive income tax rates, and not only should the low end benefit, but the high end should benefit, as well as the middle.

Abrams says the latest state numbers show most of the recent budget surpluses came from income taxes and the state's wealthiest people deserve to get money back in proportion to what they've paid in. Governor Ventura says his tax cuts do include the wealthy.

Ventura: Ours is spread over all the income tax brackets. If you need a lesson in taxation, you all pay!

Ventura sees things like this: All income taxpayers pay the low rate on the first $25,000 or so of their salaries, so everyone benefits. The difference is, his tax cuts will seem bigger to the poor and the middle class, because it will apply to all or most of their income. For people making more than $150,000 the rate cut applies only to the first $41,000 or so of their income. And Ventura says that's as it should be.

Ventura:So Whether you make a million dollars a year, you get relief! Not that I don't think you need it. At a million dollars. Pay me a million dollars, and I won't need it.

The Governor likes to portray his tax cuts as pro-middle class. But are they really better for middle class families than the Republican plan? As usual in politics, everything depends on who you mean by "middle class".

If it means a two-parent, two-kid family that makes $70,000 a year, then the Republican plan is the way to go; just barely. The Republicans would save the family $445 a year; Ventura would save them $413.

A more upwardly-mobile version of that same family would do a lot better under the Republican plan. With an income of $150,000 they'd save a thousand dollars a year; under Ventura's plan, they'd save only $489.

Neither plan does much for the lower end of the middle class, known in political jargon as the "working families". A family with a total income of $35,000 would save a mere $34 under the Ventura plan; under the Republican plan, they'd save $84 dollars.

Groups that lobby for the interests of low-income Minnesotans say this isn't fair. Brian Rusche is executive director of the Joint Religious Legislative Coalition.

Rusche: People at very modest income levels won't see any of that under either proposal, because they don't have income tax liability. And yet they're paying sales taxes and property taxes, and their wages haven't kept up even with their productivity gains. And some of this surplus is simply because we have an enlarging economy, and their productivity is not being rewarded. So I think they should share in this surplus because they helped create it.

The Ventura administration says the Governor is including the lowest income brackets in his tax relief plan; his plan to rebate the surplus based on sales taxes is designed specifically to get more money to people with low incomes. That family earning $35,000 for example, would get a rebate check for $621. But that's one-time money, available only as long as the state keeps running surpluses. The two income tax cuts are permanent and Rusche says he'd rather see Minnesota's poor get a chance to participate in a long-term tax break than a lump sum when times are good.

Martin Kaste covers the Capitol for Minnesota Public Radio. You can reach him at mkaste@mpr.org.

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