Live-blogging: Tax chairs on Midday

We’ll keep tabs on Midday’s 11 a.m. conversation with Sen. Tom Bakk, DFL-Cook, and Rep. Ann Lenczewski, DFL-Bloomington. They are the chairs of their respective tax committees.

With the Legislature getting to the meat of the state’s massive budget deficit, a showdown is in the works between the Senate, House and Gov. Tim Pawlenty. The House and Senate have released tax plans that call for tax increases, while the governor has vowed to veto any bill that includes one.

Listen to Midday live.

11 a.m.: The House was up late last night and both houses will likely work a long shift today getting the budget bills together. The House takes up early childhhood, education and state government omnibus bills later today. The Senate should get to transportation and environment bills.

11:04: Remember that you’re listening to a 2010 candidate for governor. Here’s Bakk’s website.

11:08: Gary asks, why pass any increase when the governor has promised a veto?

Bakk says the governor has new revenue in his budget, too, but he doesn’t call it “taxes”.

11:11: The House bill raises $1.5 billion in new revenue. The Senate bill offers $2.2 billion in new revenue. The Senate’s version would raise income tax across the board for all Minnesotans.

11:12: Bakk recalls the 1990s, when living was easy for state legislators. Now, he says, the “pendulum has swung too far” as a result of a “tax cutting frenzy” in the 90s.

11:14: The House bill raises revenue with tax increases on cigarettes, alcohol and Minnesota’s top earners (>$300,000). As these bills will have to be reconciled before they get to the governor, which approach will win out?

11:15: I’d been mulling a post along the lines of this topic for a little while that boils down to this: Is there a way this can possibly end well?

Can the governor, the Senate and the House get the work done on time in a civil enough manner that doesn’t leave a horrible taste in your mouth?

11:18: Already there’s going to be a showdown between the two Democratic branches of the Legislature, before we even get to the Republican governor. Bakk says he doesn’t agree with the House’s tax approach.

11:20: Bakk says he hopes to get Gov. Pawlenty involved in the conference committee process. But with the House and Senate so far apart on some fairly fundamental structural changes, it might serve Tim just as well to let them duke it out.

11:22: Gary asks about extending the sales tax to clothing, etc. Bakk says it would be a “major reform” to Minnesota’s tax policy, and needs to be initiated by the governor.

“I think it’s kind of a waste of our time,” Bakk says.

11:25: Caller: Statistically, more smokers are poor folks. Why add another tax to their burden…

Lenczewski says people who are smoking are costing the state a tremendous amount of money. The state is already subsidizing smokers through the cost of health care.

Bakk says the cigarette tax is one of the most regressive taxes in the system. Re: alcohol taxes, neighboring states with lower rates would siphon business away from border communities if taxes were increased.

11:28: Caller: aren’t the proposals just replacing private sector jobs with government jobs?

Bakk rattles off a list of tax credits to counter the notion that his bill isn’t job-friendly.

He adds that Pawlenty’s track record hasn’t been that great when it comes to job creation, but is that a fair critique given the recession we’re in?

11:32: Lenczewski calls the 4th tier tax adjustment a “moderate adjustment.”

11:33: It’s news break time, so that means it’s time for a quick poll.

Which tax approach will win out?(online surveys)

11:37: A caller from rural Minnesota: My property values are going down, but why do my property taxes keep going up?

Pawlenty’s budget forecast assumes that property taxes will go up.

Perhaps as a consequence, many local governments are spending more money lobbying the state government.

11:39: Lenczewski boils it down. “There is no joy in this.” House and Senate are choosing to pay it off now, while the governor is using debt to cover the current situation.

11:41: Caller passes along the argument that higher taxes on higher earners will be a disincentive to job-creators.

Bakk says middle income folks pay 12% in state and local taxes. Earners making $150,000 pay about 9%. See for yourself… Here are Minnesota’s tax incidence studies.

11:45: Basically, with a $4.6 billion budget deficit, somebody is going to get hurt.

11:49: In the comments, Mel says:

I estimate that the House tax plan will cost our family 6-7 thousand $ a year. This money will come directly out of our support for MPR, Minnesota Orchestra, Guthrie, St. Marks’ Cathedral, etc. I don’t think we’re alone or unique. How will reduced support for these cultural treasures help our Minnesota quality of life?

A salient point. What does the ripple effect from this budget crisis look like a few years down the road?

Commenter Martha makes the same point with a different twist. What about bartenders, etc. who depend on tips? Won’t an alcohol tax take a chunk out of their earnings?

11:52: After all this budget mess is said and done, are we going to see a sea change in the membership of the Minnesota Legislature? Will we have a new governor in 2010? Or do you get the sense that our representatives are doing the best they can with the hand they’ve been dealt?

11:54: Bakk: if the governor does not agree to new revenue, we’re going to see some deep, deep cuts.

11:57: The Senate bill comes up for a floor vote tomorrow. The House bill comes to a vote on Saturday.

11:59: Thanks for following along folks. I’ll post the audio as soon as its available. Feel free to continue the conversation in the comments.

  • Lawrence

    Everybody thinks it is so easy – don’t raise taxes, cut spending – poof, our problems are solved. The trouble is that cuts alone will not make the budget deficit disappear. More importantly, we will pay more money to restore or create new services to replace the ones government plans to cut. The property tax fiasco taught us that.

  • Lois

    The budget problems need to be solved. Gov. Pawenty’s previous budgets have cut people from nursing homes, cut people from state parks, cut to the bone. It is time for those of us with a bit higher income to step up and show how thankful we are for this great state and pay higher taxes. No more raising fees and borrowing from the future like the Gov’s budget does.

  • Mel Sahyun

    I estimate that the House tax plan will cost our family 6-7 thousand $ a year. This money will come directly out of our support for MPR, Minnesota Orchestra, Guthrie, St. Marks’ Cathedral, etc. I don’t think we’re alone or unique. How will reduced support for these cultural treasures help our Minnesota quality of life?

  • Martha

    Have the lawmakers proposing raising alcohol taxes thought about waiters and waitresses who serve alcohol and depend on tips to make a living, and that if the tax on alcohol increases patrons might lower their tip percentage to counter the increasing bill?