The hot topic at the Minnesota Capitol, on editorial pages, at the coffee shops and in homes across the state is Gov. Mark Dayton's proposal to reform the state tax system. We have applauded the governor for taking up the issue. Every special interest that gets a tax break, that wants one or that deserves one is eyeing the debate. As are ordinary Minnesotans concerned about the outcome.
We believe Dayton has made a good start that can be adjusted by the Legislature. Here are our suggestions:
1. Dayton's plan would bring in $2 billion more in revenue over the next two years. That's too much. While we expect Dayton and fellow Democrats to raise taxes, they need to remember the people paying the bills. Tax reform should broaden the base and flatten the rates. This creates an opportunity for more revenue, but it shouldn't be exploited to the extent the governor envisions.
2. That said, Dayton would expand the sales tax to services currently not taxed, as well as more retail sales. We don't mind the expansion. Why some transactions are taxed and others are not doesn't make sense. In turn, Dayton would lower the sales tax from 6.875 percent to 5.5 percent. But, it should be lower. And it can be if lawmakers don't get greedy for revenue.
3. Dayton would raise cigarette taxes by $1 per pack. This is pure social engineering. Dayton wants to force people to quit smoking, but this is a vicious tax on the state's poorest citizens, on a product that is legal.
4. Dayton would create a new tax on the wealthiest Minnesotans, something that has been a cornerstone of his governing philosopshy since he ran for election in 2010. This is pure class warfare, and is equivalent to putting up big signs at the state border saying, "Entrepreneurs wanted - so we can tax you."
5. The governor does make an attempt to boost economic growth. He would cut corporate income taxes by 14 percent and place a two-year freeze on business' property taxes. This is good. What's troubling is whether Dayton's sales tax will affect business to business sales. Or just sales to customers. It makes a big difference.
6. The governor has proposed a $500 property tax rebate for every homeowner. He also wants to see more state aid go to cities and counties. This is essentially a shift in how some local services are paid for. People in the Fairmont area would like this change:?It would wipe out property taxes for some.
In the end, Democratic lawmakers must balance their interest in more revenue with what is right for taxpayers and the state's business climate. This year is an opportunity for reform. It has to be the right reform.