PoliGraph: Dayton tax increase big, maybe not biggest

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Gov. Mark Dayton’s $37 billion budget plan has not been warmly received by Republicans.

For instance, GOP House Majority Leader Matt Dean objects to the $4 billion in new taxes and surcharges contained in the bill. They represent “the largest tax increase in Minnesota’s history,” Dean said during a Feb. 15, 2011 press conference.

Largest in the state’s history? Maybe.

The Evidence

In an attempt to reduce the state’s deficit, Dayton’s budget proposes tax increases and new fees amounting to $4.129 billion over the 2012-2013 budget period – roughly 11 percent of Dayton’s overall two- year general fund budget.

This claim is tricky to sort out. First, the state doesn’t have adequate tax data going back to Minnesota’s earliest days, so it’s difficult to say whether Dayton’s plan would be the largest in Minnesota’s history.

Still, there are some notable tax moments in Minnesota’s recent history that serve as good benchmarks.

The “Minnesota Miracle”: For many years, communities relied on local taxes to support their schools and services. But in the late 1960s, less affluent towns were having trouble raising enough money to adequately support education and services. In 1971, the Legislature approved a sweeping package of tax changes meant to equalize school and services funding across all Minnesota towns. Called the “Minnesota Miracle,” it was estimated to generate $580 million over two years in new revenue – about $3 billion in today’s dollars – and represented about 20 percent of the 1972-1973 $2.8 billion general fund.

Income Tax Surcharges: In the early 1980s, the state was facing major revenue shortfalls. In an attempt to make up for the loss, the legislature approved more than $1 billion in new taxes between 1981 and 1984. Today, those changes would be valued at more than $2 billion. But each tax change was relatively small. For instance, a 7 percent income tax surtax – later increased to 10 percent – raised roughly $230 million in new revenue between 1981 and 1983, or nearly $500 million today. It represented about 3 percent of the 1982-1983 $8.2 billion general fund.

The 2008 Transportation Taxes: In 2008, the Legislature overrode Gov. Tim Pawlenty’s veto of a massive transportation bill, which raised the gas tax by 5.5 cents per gallon and included other transportation fees. At the time, legislative researchers estimated the bill would raise roughly $6 billion over 10 years. Based on that projection, the taxes will add an average of $1 billion to the state’s coffers every two years.

The Verdict

Dean’s claim is Inconclusive because it’s difficult to check it against every tax increase in the state’s history. However, it appears that Dayton’s revenue proposal is quite large compared to some of the state’s recent tax increases. But as a percentage of the two-year general fund budget it would still be smaller than the “Minnesota Miracle.”

SOURCES

The Uptake, GOP, DFL Leadership Reacts to Gov. Dayton’s Budget, Feb. 15, 2011

Minnesota Management and Budget, FY 2012-2013 Biennial Budget, accessed Feb. 15, 2011

Minnesota Management and Budget, Historical Expenditures: General Fund and All Funds, accessed Feb. 17, 2011

The Minnesota Historical Society, Public Education – The Minnesota Miracle, accessed Feb. 16, 2011

The William Mitchell Law Review, The Minnesota Disparities Act of 1971: The Twin Cities’ Struggle and Blueprint for Regional Cooperation, by Myron Orfield and Nicholas Wallace, March 7, 2007

Minnesota History, The Minnesota Miracle: A Roundtable Discussion, Winter 2007-2008

Strong Towns, A Brief History of Minnesota’s System of Local, Government Finance: 1960‐2010, accessed Feb. 15, 2011

Minnesota Legislature, Laws 2008, Chapter 152: Preliminary Resource Estimates (FY 2009 – FY 2018), accessed Feb. 16, 2011

Center for Educational Policy Studies, Chronology of Minnesota’s Fiscal Crisis July 1, 1979 though Dec. 31, 1982, January 1983

Minnesota Legislature, Fiscal Review 1981-1981, January 1985, accessed Feb. 16, 2011

The Star Tribune, Editorial: Fact or fallacy: Legislators blur the line, March 1, 2008

Minnesota Public Radio, State’s Gas Tax Goes Up Today, by Tom Weber, April 1, 2008

Interview, Mark Haveman, Executive Director, Minnesota Taxpayers Association, Feb. 17, 2011

Interview, Rep. Phil Krinkie, President, Taxpayers League of Minnesota, Feb. 15, 2011

Interview, Scott Russell, Policy Analyst, Minnesota Budget Project, Feb. 16, 2011

Interview, Joel Michael, House Legislative Researcher, Feb. 15, 2011

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