Thursday, December 1, 2011

Minnesota tax reform: It's not all give and takes

Recently the Minnesota Commissioner of Revenue Myron Frans met with about 35 business people from the Mankato area for a "listening session" on tax reform.
His charge from Governor Mark Dayton was to take some time in the next year to develop proposals to be presented outside of an election cycle which may polarize positions rather than have a productive discussion.
But rather than an objective look at tax structure, it was clear from the presentation that a bulls-eye is still on higher income Minnesotans.
Frans presented slides entitled "While income is increasingly concentrated at the top ... the Top 10% now has 50% share of income" and "The tax burden is being shifted to those with the least ability to pay....The middle class is paying a larger share of Minnesota taxes."
Frans' conclusion: The top 10% of income earners are not "paying their fair share."
This has been a DFL refrain for several years now and it was unfortunate that he led the discussion to business people who may have a different interpretation of the data.
But, Frans did point out that over time, we have shifted a greater share of state revenue coming from property tax at the expense of sales tax. And for the individual income tax, the state has dramatically increased the number of adjustments and credits favoring special interests.
So the question posed by Frans and the state legislators in attendance to business people was "What are you willing to give up?"
The response, instead, was "Let's talk about spending first before we talk about shifting sources of revenue." In other words, have we had a serious discussion about the role of government, prioritizing those roles and determining how to fund those essential services. Afterwards, we can debate if we want other services funded and how.
Easier said then done and, frankly, not in the purview of the commissioner's mandate from the governor. So, let me go back to the charge of "what are we willing to give up?"
Here's a suggested list I gleaned from discussions with people in the community and from tax reform advocates on "what to change."
--Remove sales tax exemption on food, clothing and services. In exchange, lower the rate. Arguments against: "Increasing" taxes on food and clothing is regressive. Response: While it may be regressive, there are elements that suggest wealthier pay more overall for higher priced goods they buy...and of course, a sales tax is a "choice" tax. A T-bone steak will bring in more revenue than the same tax rate on a bag of Cheetos.
--To support reimbursement of health care costs for the needy, increase taxes on tobacco and alcohol. Arguments against: Again, it is a regressive tax. But also unreliable since people may cut their consumption and thereby we have less revenue. Response: Well then it improves the collective health of users who in turn may not need as much health care in the future.
--Phase out LGA but allow cities to impose their own local option taxes to fund services its constituents want. Regional centers, like Mankato-North Mankato, can increase their local option sales tax to help fund infrastructure being used by those people visiting the city. Arguments against: Small cities don't have enough traffic to garner large revenue support for infrastructure services and would be at a disadvantage. Response: Life is never a level playing field. Is it really the responsibility of the state to determine who are the haves and the have nots?
--Look at the estate tax and reduce the amount of taxation (as much as 40% on wealthy Minnesotans). Arguments against: The proportion of population being elderly will be substantial in the coming years and a great degree of revenue will be lost if we cut their taxes. Response: Those elderly may be leaving the state in order to avoid paying the estate tax. These are the least likely to use services (health subsidies, schools, etc.) but will still be here to help fund them.
--Cut the business incentives for new equipment and R&D that favor corporations or specific business activities. In turn, increase tax breaks for small businesses that are the true drivers of job growth. Arguments: This will put us at a disadvantage in attracting major employers. Response: The real concern now is with employers who already are in the state and trying to survive.
There are no easy answers to our budget problem. However, there was a winning formula in 1986 when President Ronald Reagan signed into law a sweep tax law reform. It was done with bipartisan help but it also was backed up with real economic analysis supporting the effect rather than partisan political positioning.
It was whittled away over time by special interest lobbying and legislators looking for their own perks. This is the normal course of how things evolve and we need to get on a path of constantly looking at regular periods of reform that has as its goals -- fairness, simplicity and business competitiveness.

Monday, November 14, 2011

Mankato visits Charlottesville, bringing back...?

About six years ago, Mankato began sending delegations made up of leaders from both the profit and nonprofit sectors -- about equally split -- to learn what other cities are doing. The goal was to broaden perspectives and take home ideas that would benefit the region as a whole.
The delegation has been to Bellingham, WA; Fort Collins, CO and most recently Charlottesville, VA to meet delegations from those cities.
I didn't make it to the first two and the concept was intriguing so this time I hitched a ride. On the agenda was learning more about governmental cooperation, town/gown initiatives, early childhood education programs, downtown rehabilitation and public affairs among other topics.
Here are some takeaways:
--On paper, Charlottesville has a lot in common with Mankato. Population is about the same. It's close to a metropolitan area (Washington DC and Richmond VA). A university town with a strong community college and governmental units were separate so they needed to cooperate on different levels.
But we couldn't be more apart in some important levels. The public-private partnership in the greater Mankato region is much stronger in sharing costs and investments. In Charlottesville, there are few business influences so it relies upon government to reach out for development of which they are loath to do.
-- It's a conflict between preservationists in an area surrounded by the Blue Ridge Mountains and business growth. The fear is the area will turn into a tourist-laden commercial zone like Tennessee's own Gatlinburg or Dollywood. The pendulum has swung pretty heavily to one side. One story told of a major investor wanting to come to town and rather than work on incentives or pave the way to make it easier, the governments there said "We have no objection if you come." The investor didn't.
-- The region relies heavily on federal government contracts, especially in defense, and research parks being developed by the University of Virginia which reaps the benefits of research since it is a privately held institution.
--UVA has a huge influence in the city. Besides the research parks there are a number of medical centers built and staffed by UVA. And investments as donations proliferate the city. It does not take its largess for granted reaching out to the community to discuss its own growth and changes within the neighborhoods. It also extends a large hand in assistance both from its faculty and students to the community. Tenure qualifications include community service.
-- Education is highly valued in the Charlottesville area with strong support for elementary and secondary schools. Both county and city have their own districts. Student teacher ratio in elementary is 13:1 in the county and 10:1 in secondary.
-- There are no "bars" per se in Virginia. If you want to sell alcohol about 60% of your receipts must come from food. Rationale is more safety, lower cost of enforcement, health and treatment. Consequently, with some major investment for upgrades, its downtown area is healthy as a pedestrian mall with shops, restaurants, theaters and other small niche businesses including a book store owned and operated by author John Grisham and a children's museum. At the end of the mall is a Telos Wireless Charlottesville Pavilion built by developer and manager of the Dave Matthews Band on land leased for a dollar a year by the city. DMB started in Charlottesville in the '90s and continues to bring big name bands to the city. Concerts are often free but the beer isn't.
-- The city, counties and UVA share their comprehensive plans to ensure they are in synch with one another especially on the edges.
More viewpoints on this trip will be coming from other participants later in The Free Press.

Wednesday, November 2, 2011

Benson Park area site of new apartments

Construction on an apartment complex next to Benson Park in North Mankato is under way.
With an eye toward 13 units in the years ahead, Craig Theuninck Construction of Kasota is starting with two four-unit apartments being built between the southeast corner of Benson Park and Arlington Lane on Carlson Drive. Completion is targeted for last winter or early spring.
North Mankato City Planner Mike Fischer said the apartments are similar to those Theuninck built at the intersection of Haughton Avenue and Howard Drive.
Residential construction has been expanding around Benson Park most recently with a subdivision built by Drummer Construction on Rolling Green Lane and Timm Road. Plans are for a natural resources-themed park (details here) complete with natural play areas, natural amphitheater, sugar shack/tree house in woodland, picnic area, outdoor classrooms and demonstration areas and a fishing pier on Ladybug Lake.
The city is hoping for state funding assistance to develop the park.

Thursday, October 6, 2011

Don't like income tax? Blame Prohibition

Let's revisit for a moment today's political sound bites.
We either should "tax the rich and pay our fair share." Or the income tax is "unconstitutional" and "puts an unfair burden on job creators."
Critics on both sides say this is great class warfare fodder. Maybe it is. Real class warfare will emerge when the unemployed continue to be without work in the longest job-related dry spell since the 1930s.
However, rather than feed the flames of emotion, I found it interesting when tracing back the history of the income tax, how it was philosophically devised given the backdrop of a country founded against unfair taxation.

IN THE tender years of America, the federal government was supported by internal taxes , not income taxes. Things like taxes on distilled spirits, carriages, sugar, tobacco, corporate bonds and even slaves. In fact, the only time we looked for alternatives was to help fund the high cost of wars.
The War of 1812 we saw the first sales tax on gold, silverware, jewelry and watches.
Five years later, Congress did away with all internal taxes relying on tariffs of imported goods.
Then the Civil War broke out and Congress enacted the nation's first income tax and by 1872 it eliminated it, focusing rather on taxing tobacco and distilled spirits.
And that proved to be most beneficial for revenue if not so much for the nation's health. Revenue from alcohol taxes accounted for 80 percent of the federal tax collections in 1907.
If you're getting that much revenue, it's because there was a lot of drinking going on and it was having a harmful effect not only on those who drank, but their families and their employers.
The admirable and entrancing Ken Burns PBS series "Prohibition" pointed out that "By 1830, the average American over 15 years old consumed nearly seven gallons of pure alcohol a year – three times as much as we drink today – and alcohol abuse (primarily by men) was wreaking havoc on the lives of many, particularly in an age when women had few legal rights and were utterly dependent on their husbands for sustenance and support."
The subsequent rise of temperance groups and prohibitionists started to have effects on government and by the turn of the century, the fervent "teatotalers" were a formidable force. Tactically, it knew it needed to replace America's reliance on alcohol for revenue, so it got behind the Sixteenth Amendment to the U.S. Constitution in 1913 imposing the national income tax. It soon became the chief source of revenue replacing alcohol and opening up the doors to accepting Prohibition and enacting the 18th Amendment, a prohibition on alcohol.
It should be noted that President Howard Taft, a Republican, pushed for the income tax.
Burns' series points out that "Prohibition cost the federal government a total of $11 billion in lost tax revenue, while costing over $300 million to enforce. The most lasting consequence was that many states and the federal government would come to rely on income tax revenue to fund their budgets going forward."
It was that reliance, that unintended consequence of ending a national vice that spawned the controversial and imperfect national income tax of today.

Monday, September 12, 2011

Tee It Up debut nets $65K

The first ever "Tee It Up for the Troops" fundraiser found a home in Mankato. More than $65,000 was raised for the veterans and their families at both the golf event and the last minute "Tune It Up for the Troops" concert which drew an estimated 2,000 people.
An event like this requires some real dedication and passion which was event from Marley Lloyd, Mike Enger and John Wolf. A tremendous amount of time and energy was devoted and there already are plans for another event next August 27.

Thursday, June 16, 2011

140 not enuf room 4 full story

As the deadline for a state budget looms, the afterburners on both sides are kicking in. The governor and legislators are taking their respective cases to the people through news media and even social media. Sometimes the behind the scenes dialogue gets testy.
On Thursday, there was this Twitter exchange between Kevin Watterson, director of media services for Minnesota House GOP (aka Twitter's "kwatt"), and Bob Hume, senior communications adviser for Gov. Dayton, (aka "bobhume").
It all started with this "tweet" from Carrie Lucking, director of public affairs for Minnesota House DFL Caucus, regarding Local Government Aid to Cities.
(For the purposes of publishing this exchange and make it more readable I have taken the liberty of expanding the truncated dialogue that often happens on Twitter with its limitation of 140 characters per "tweet.")
"Think @repmattdean will talk about the millions of LGA cuts for Mankato?"
Kwatt responded "Mankato would get exactly what they got in 2010"
Bobhume: "Actually, the GOP budget has Mankato looking at a 12.6% property tax increase to absorb the cuts in LGA"
Kwatt: "Mankato received $6,228,727 in 2010; in 2011 $6,228,727; Change from 2010 to 2011 = 0. In 2012, $6,228,727, Change from 2011-2012 = 0
Bobhume: "In 2012, Mankato will get cut by $1,608,937. How can an entire party think this budget exists in some kind of vacuum where consequences don't exist?"
Kwatt: "So you're saying $6,228,727 is $1,608,937 less than $6,228,727? No wonder you can't put together a list of spending cuts?"
Bobhume: "Zing? 2012 current law =$7,837,664. 2012 budget with GOP cut - $6,228,727. Your total cut = $1,608,937."
Kwatt: "Oh, so we're going by the increase that's never happened as being what they should get. Got it."
Well, they're both right -- kind of.
For the record, Mankato didn't budget for the $7.8 million because it knew the state would likely cut back but not decimate LGA.
I asked Tanya Ange, assistant city manager for Mankato, for some history of LGA allocations to put this discussion in perspective.
As a point of reference to where the city was at one time,, in 2002, Mankato received $9.3 million in LGA.
In 2005, $7.4 million; 2006, $7.97 million; 2007; $7.8 million; 2008, $6.5 million, 2009, $6.95 million.
But in 2010, after certification to receive $7.8 million, it actually received only $6.2 million after then Gov. Tim Pawlenty's unallocations. In 2011, it was set to receive $7.9 million but the city budgeted $6.4 million and in 2012, it was scheduled for $7.9 million but who knows what will happen between now and then.
Last year, Mankato City Manager Pat Hentges told the council he was budgeting the lesser amount in part on a political analysis of how much the the Legislature will cut from LGA amid the huge budget deficit being forecast by the state. He was already preparing to live with declining state aid by cutting staff levels 15% over the last three years. But the city also approved a 1.9% hike in the tax levy to soften the impact of lower property values.
Of course, other Twitter followers of "kwatt" and "bobhume" don't have that on-the-ground perspective and history and that's not the purpose of such heightened dialogue. However it does show the inherent danger of getting your information solely from social media.

Thursday, May 26, 2011

Drop the Molotov and pick up a plow

In the mid-1980s, unionized Hormel meat packers in Ottumwa, Iowa, went out on strike in support of their counterparts battling it out in Austin, MN. Rather than work on compromises between the workers and the company, the mayor threw his unbridled support to the union. Hormel responded by shutting down the plant and the city continued to re-elect that mayor for his "principled stand." The city residents felt they won and showed their appreciation by re-electing the major. In the ensuing years, population dropped 11% and the downtown became a collection of closed businesses. The city lost a lot of tax revenue from both the plant and workers who were laid off and the replacement company, Cargill, set up shop paying much lower wages. Unemployment rates there consistently led the state. The high school dropout rate was double that of other Iowa cities.
I'm thinking of all this because of conversations I'm hearing over the "principled stand" that many in the Minnesota GOP are taking spurred on apparently by constituents who sympathize with the tea party. I've talked to some of those constituents (especially after they read my column) and they are so fed up with government overspending, "entitlements to the lazy," and higher taxes they just want it all to stop. They don't care how and they don't care what gets cut; they just want it to end - now.
I can sympathize with their feelings. I too am dismayed by some of the things that have gotten sorely out of control - we're finding generations who know no other existence except reliance on government supports -- from welfare to farm subsidies. While private sector employment has dropped, public employment has risen and with better benefits. And many feel that adherence to morals and tradition has eroded. Even last week, new data show that married couples are not the majority anymore. The income gap is widening between the rich and the poor.
We all want a day of reckoning. I get that. But there is no simple solution. And all actions have reactions, some not pleasant and many not planned for as my Iowa example attempts to show.
The best solution is often the messiest. It requires negotiation with many voices. And then it requires patience to make it happen. We've all seen what happens when things are done in haste.
Let's stop electing people who throw political Molotov cocktails in order to make you feel better. Stick with those who can make things happen, who can plow the ground and plant the seeds making things better rather than promise to bring things down. Because in the end, not unlike Ottumwa, you'll be asking yourself "Now that I did it, what did I do?"

Thursday, March 10, 2011

Is it caveat emptor or venditor for GOP?

It is indeed curious how lawmakers differ in how they see their roles even within the same party.
In Minnesota, state lawmakers are pushing to expand -- not limit -- the sale and distribution of raw milk even though proponents acknowledge unpasteurized milk cannot be 100 percent risk free. The U.S. Centers for Disease Control and Prevention reportedly said raw milk is one of the riskiest ways to get foodborne illnesses. In fact, it can be fatal. But State Sen. Sean Nienow (R-Cambridge) and chief author of the bill told Minnesota Public Radio "No food product of any sort is absolutely safe." So buyer beware.
Meanwhile, the Minnesota Senate Commerce Committee passed through legislation that prevents restrictions on the sale or transfer of etickets. The bill's sponsor, Sen. Chris Gerlach (R-Apply Valley), said if a ticket holder wants to get a better price for his ticket "that should be allowed and should not be aced out by restrictions. Minnesota Twins president Dave St. Peter however said "There's a battle being waged here...between the scalpers and fans and the scalpers are winning." Concert promoters warn that top artists might bypass Minnesota if they can't ensure their fans can get good seats. Free enterprise unfettered?
Across the Potomac, U.S. Sens. John McCain and John Kerry are floating legislation creating an "online privacy bill of rights." in order to curb the internet-tracking industry. The bill would provide companies to seek permission before sharing data about a customer with outsiders. And it would give you and me the right to see the data collected on them. In other words, we're watching out for your interests.
Interesting juxtaposition. Freedom to get sick and freedom to gouge, so buyer beware. But track my keystrokes on the internet, seller beware.

Thursday, March 3, 2011

The good ole boys?

The Blue Earth County Board is pondering how to fill the seat left vacant by the retirement of Dennis McCoy who served as county administrator after 30 years. He was promoted from his position as the county's human resources manager.
Rather than seizing this moment as an opportunity, the board seems to be focused on whether to just give it to the in-house interim or open it up to other county employees. Our editorial board has been trying unsuccessfully to have it give serious consideration to opening it up to outside candidates.
Our argument is a lot has changed in 30 years. Demands on the county have increased and state government funding is at a crisis. We've argued this might be the time to get a professional administrator to give the board different perspectives. Alas, the plea fell on deaf ears. Its excuse was time, expense and inexperience in outside searches. What it seems to be missing is --how does this affect the integrity of the process or the credibility of the candidate?
In the past, it was a widespread practice that civil service jobs in the U.S. went to relatives or friends of existing employees or elected officials. The American Civil Service Act was passed over 125 years ago because patronage jobs and favoritism weakened the perspective on government service. "It's not what you know, but who you know."
This, in turn, undermined the faith in government itself.
I am not questioning the motives of the BEC board members but rather trying to get them to understand their actions have consequences. You want to be above board in everything and avoid the possibility of false perceptions.
It is common practice that elected officials get perspectives on issues from all sides and not just those from people they know. We're asking nothing less in hiring for the most important position for the county.
What do you think?

Wednesday, March 2, 2011

Another voice enters

Back in the "old" days (yes, when I started out), newspapers had manual typewriters, hot metal presses and something called a rewrite desk. Reporters in the field would call in from pay phones (remember those?) with notes, observations or updates to the rewrite editor who would string together a comprehensive, readable story that combined all the elements and try to put those elements into perspective. Well, as I interact with different people in our communities, read analyses and trends and most importantly listen, I get a wide range of news, reliable tidbits and informed opinion. I've had the good fortune of living in a number of different communities and certain contrasting perspectives start to emerge. Hence, the title of this blog. These perspectives can be altered over time with new information and I hope to share the originals and their adaptations when I can.
I would enjoy very much hearing your perspectives and, hopefully, we can have a civil (I underline "civil") dialogue and learn from each other.
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