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Pentel's water tax - a good idea?
by Laura McCallum, Minnesota Public Radio
October 24, 2002

Green Party gubernatorial candidate Ken Pentel is proposing a water tax to balance the state budget. Pentel says a 3-cent per gallon tax on commercial/industrial water use could wipe out a deficit that could top $3 billion. Some companies, however, say such a tax could put them out of business.

Pentel has been the most specific of all the candidates in spelling out how he'd balance the budget. He says he'd start by taxing water use, which would encourage conservation. He says a 1-cent a gallon tax would raise $1 billion, 2 cents would raise $2 billion, and 3 cents, $3 billion. Pentel doesn't want to tax residential water use, just the water used by businesses.

"Especially in the industrial use of water, those are the areas where we see a lot of high-level contamination, and those are areas we can focus on more acutely. A broad-based tax on residential right now to me would be punitive, costly to maybe the middle and lower income people the most," says Pentel.

Heavy water users say the tax could put them out of business. Boise Paper Solutions in International Falls, which employs more than 1,000 people, uses about 25 million gallons of water daily. Public affairs manager Bob Anderson says a penny a gallon tax would cost the paper mill $250,000 dollars a day.

"I don't think Mr. Pentel has given this the kind of thought that it really needs, and understands the tax burden that business already carries in this state," he says.

Anderson says the mill takes water out of the Rainy River, and has invested more than $200 million in the latest technology to make sure that the water returned to the river is clean. The paper mill also pays a water use fee to the state that Anderson says is in the tens of thousands of dollars.

DNR officials say the fee generated about $2.5 million for the state's general fund last year. Businesses pay more than 60 percent of the money raised. DNR officials say the water tax Pentel is proposing would be a dramatic increase in what the state currently collects from water use.

It would also set Minnesota apart from other states, according to Dan Salomone, executive director of the Minnesota Taxpayers Association. Salomone says Pentel's idea isn't good tax policy, because it would only target businesses, and would hit some businesses harder than others.

"A good tax is one that falls uniformly on a broad base of taxpayers, if it's a general tax," says Salamone. "A tax ought to be neutral as much as possible, not disrupting the private decisions made by businesspeople or consumers -- unless of course that's the whole goal of the tax, which might be the case with a cigarette tax."

And that's one of Pentel's motivations. He says while he doesn't want to put anyone out of business, a water tax will make companies think about how much water they're using.

"I'm asking them to look in the mirror right now, and ask themselves, how are we using water? And there are better ways of doing it," says Pentel. "It's easy for them to use 25 million gallons a day."

Pentel says he doesn't want to shock the system, so he would consider phasing in a water tax. None of the other gubernatorial candidates has embraced Pentel's idea.

But the other three -- DFLer Roger Moe, Republican Tim Pawlenty and Independence Party candidate Tim Penny -- also haven't listed specific taxes they would raise or programs they would cut to balance the budget.

Pentel says he would consider other ways to raise revenue as well, such as raising income taxes for upper-income Minnesotans and taxing high-polluting vehicles.

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