Hey T-Paw, Don’t Veto the Tax Bill!

Editor’s Note:  Matt Martin writes a column twice monthly on the 1st and 15th (he’s 2 days early).  This article is cross-posted at MNpublius.

With this session’s most politically tenuous piece of major legislation finally hitting the Governor’s desk, political observers are waiting with bated breath to see how blindly loyal Pawlenty is to his ideological overlords.

In the final hours of the session, the state legislature painfully birthed bill after bill, each born of some gubernatorial compromise.  With the exception of a few line items, each of the major bills have survived the ever looming threat of the veto pen but that could all change in the next few days: All indications are that the Governor will lay the red ink on the tax bill.  Why?  Well, it certainly isn’t because of the check made out to the RNC to help with preparations for the 2008 convention…  No, the thing that really gets our stubborn leader’s goat is responsible accounting.

more insideLet me explain.  The tax bill once again returns Minnesota to the fiscally responsible practice of taking into account inflation when projecting future spending (which we did before 2002).  The practice is not only universally applied in the business world, but states across the nation also seem to be pretty fond of the idea:

Minnesota is believed to be the only state that does not tally expected inflation when estimating future spending. “If I’d tried to do that, I think I would have been put in jail,” Richard Sims, former state economist for Arkansas and Kentucky, said in an interview when he visited the Minnesota Legislature, Feb. 6. [Star Tribune, 5/30/07]

That’s right, the only state…

By his own words, Pawlenty has mentioned only this inflation provision among the reasons to veto the bill; for some reason ignoring the many items he finds agreeable in the extensive bill.  To veto the entire bill just because of a single provision that the vast majority of states have already enacted seems, well, odd.  Indeed, the same editorial piece had the following to say about the tax bill:

It’s such a solid piece of lawmaking workmanship that if Pawlenty vetoes it — and we urge him not to — he should feel obliged to help rebuild the bulk of it as soon as possible, by calling a special session.

This bill isn’t a tax-increase bill. If it were, it would not have received 10 Republican votes in the Senate. Rather, it’s a tax-exchange bill, raising a modest sum by closing an unintended corporate tax loophole, and using that money to pay for property tax relief and a break to Minnesota-based corporations. [Star Tribune, 5/30/07]

In short, if the Governor vetoes this bill it will not due to his oft-cited excuse of a tax-hungry legislature; taxes are not raised under this bill.

If the Governor vetoes this bill it will solely be about his opposition to fiscally responsible governance.  To the Governor, and to many of his uber-conservative allies, extricating inflation from spending projections amounts to a back-door government shrinking mechanism.  After all, if the dollar is worth less next year that amounts to a reduction in government spending power as long as the dollar amount remains the same.  And since the government isn’t keeping the spending power at the same levels year over year, surpluses will appear because revenue does naturally adjust for inflation.  While that sounds nice, it amounts to stealing money from the education department just to drop it in the surplus pot.  These artificial “surpluses” are then used by conservatives to push tax cuts, which starts the whole circle over again.

Moreover, refusing to include inflation allows the Governor to trump out relatively minuscule increases in dollar amount spending and bill them as “spending increases.”  In fact, the Governor has done just that during his tenure.  For example, education spending levels have not yet reached the 2003 levels when inflation is taken into account, but the Governor still maintains that he has “increased” education spending during his time at the capitol.  This is technically true only because inflation was removed from projections; were it included the Governor could only truthfully say that he had cut education spending.

These may seem like silly sticking points but they are changes in wording that can swing elections (especially when they are as close as the last Gubernatorial election).  After all, what seems more honest: claiming that you increased spending when the real-world spending capacity of a department has decreased, or admitting to budget cuts under that same real-world situation?  Perhaps I’m delusional, but I would guess that the majority of Minnesotans are on my side here.

Even outside the political considerations (where all true policy decisions would be made in a perfect world) adjusting for inflation just makes sense.  To my knowledge we’re the only state in the nation that fails to adjust for inflation, but just to cover my own behind, let’s merely say that the vast majority of states do so.  Why would we allow the partisan agenda of a handful of people get in the way of a fiscally responsible policy that the whole of the business community abides by and the “vast majority” of states, Republican and Democratically controlled alike, have enacted?  The only answer can be blind allegiance to a mistaken few.

Make no mistake, this is an important bill.  The bill closes corporate tax loop holes and uses that money to provide local government aid to the tune of millions.  Mayors across the state are begging the Governor to pass the bill because it means much-needed money for items they have been desperate for since the LGA cuts in ’03; such extravagant things as more police officers.  Moreover, this bill represents the last real chance for any property tax relief this session, even if it is more acutely focused on lower-income families.  Yet the Governor would pass up all of this (without any tax increases!) just because he disagrees with the world’s accountants.

The tax bill has scores of financially responsible measures that will benefit scores of real Minnesotans.  To veto this bill would be to sacrifice the sincere interests of millions of Minnesotans at the altar of blind ideological adherence (not to mention national political ambitions).  Let’s hope that the Governor remembers which of the two put him in office.