4.29.2013
Senate debates tax bill
The Minnesota Senate will likely pass their tax bill today, which includes $1.8 billion in tax increases and derives the bulk of new revenue from raising the state’s top personal income tax rate by 20 percent and imposing a 94-cent per pack cigarette tax hike.
Among the bill’s features:
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Increases the current top personal income tax rate by 20 percent (from 7.85 percent to 9.4 percent), with the rate kicking in at $79,730 taxable income for single filers and $140,960 for married joint filers
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Extends the sales tax to clothing and a variety of services including auto repairs and over-the-counter medication, while reducing the overall sales tax rate to 6%.
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Increases regressive cigarette taxes by 94 cents per pack.
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Modifies the formula and increases spending on Local Government Aid, which redistributes state tax dollars to cities (no strings attached)
Similar to Governor Dayton’s original tax plan, the Senate increases sales and corporate tax revenues but modestly lowers both rates, allowing supporters to claim they are "cutting taxes" while state government takes in more money. In doing so, they undercut a widely accepted principle (and necessary precondition) of good tax reform: revenue neutrality.
And what ever happened to "taxing the rich"? The Senate income tax hike is not aimed at millionaires and billionaires, but middle class families and small businesses. Liberal policymakers continue to redefine "rich"; it started as "millionaires and billionaires", then it was the top two percent of income earners (according to the Governor’s tax bill,) and now, according to the Senate, the top 7 percent of income earners are rich. This includes individuals with taxable income of about $79,730 or, in the case of married taxpayers filing separately, individuals with taxable income of just over $70,480. MinnPost reports: "The measure would affect 177,800 Minnesotans, who would pay an average of $2,435 more in income taxes, according to the Minnesota Department of Revenue."
Ironically, the Senate majority caucus released their tax plan on April 23, which is Tax Freedom in Minnesota, the day in which taxpayers are supposedly done working to fund government for the year. If the Senate prevails with these massive tax hikes, next year Minnesotans will work a few days longer to satisfy the appetite of big government. |
Moody's blues
Moody’s Investors Service is changing the way it assesses local government pension liabilities "to reflect the rating agency’s view that pension obligations are a significant source of credit pressure for governments and warrant a more conservative view of the potential size of the obligations." The new ratings rules could lead to downgrades for some cities, counties, and school districts.
Moody’s has placed 29 local government ratings from across the country under review, a possible precursor to downgrades. The list includes City of Minneapolis General Obligation (GO) bonds and City of Virginia GO bonds and Health Care Facilities Lease Revenue bonds. The new Moody’s rules, as well as new accounting standards adopted by the Governmental Accounting Standards Boards, should be a wake up call for Minnesota policymakers.
Instead of forcing state taxpayers to repeatedly bail out local governments that made promises they could not keep, it is time to make public pensions more transparent, account for them honestly, and stop assuming an unreasonably high rate of return on pension fund investments. Finally, to protect taxpayers and prevent pension liabilities from overwhelming government budgets, the state needs to follow the private sector’s lead and shift to defined contribution pensions. |
Short takes
Obamacare at the movies: Regal Entertainment Group, the nation’s largest movie theater chain, is cutting employee hours for thousands of employees, a move directly attributable to implementation of the Affordable Care Act, or Obamacare. According to a company memo to managers: "To comply with the Affordable Care Act, Regal had to increase our health care budget to cover those newly deemed eligible based on the law's definition of a full time employee." Meanwhile, HHS Secretary Kathleen Sebelius inexplicably told a congressional subcommittee earlier this month: "There is nothing in place right now in [Obamacare] that would require any employer to change work hours."
Plea for transparency: The Star Tribune ran a great commentary by former Rep. King Banaian about government transparency. Excerpt: "It is indeed tragic that this Legislature is going backward in terms of providing Minnesotans with the means of knowing more about its work. Legislators should reject these attempts to draw the shades on the sunlight."
Opportunity for high school students: Applications are currently open for the Four Star Leadership with Tommy Franks, an excellent one-week training program for 50 top high school students from across the country. This year’s program runs from July 14 through July 20 on the Oklahoma Christian University campus. For more details, or to apply for the program, visit the Four Star Leadership website. |
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1. Senate debates tax bill
2. Moody's blues
3. Short takes
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