What do you think of Gov. Dayton’s budget proposal?

Gov. Mark Dayton yesterday unveiled a budget plan that calls for lower sales taxes on a wider range of goods and services, higher cigarette taxes and higher income taxes on Minnesota’s top earners. His plan also calls for higher spending, with much of the increase going to education. Today’s Question: What do you think of Gov. Dayton’s budget proposal?

  • Mark B

    Taxing more services while lowering the overall sales tax seems like a wash, but I don’t like the tax on internet sales. Internet commerce is interstate commerce as far as I’m concerned and should only be taxed at the federal level. Amazon and other retailers will fight that tax tooth and nail as they already have done in other states.

    • GregX

      Until some national internet sales tax is established by the ill-functioning congress … it’s cruel folly to let that “bandwidth” of economic activity run free of taxes while punishing the bricks and mortar stores. Internet vendors fighting it … is losing steam. 14 states are seeking revenue there – and those companies are losing the argument.
      they’d be batter off spending money to get Congress to get something on the books ASAP.

  • Sue de Nim

    I especially like the internet sales tax. It’s long past time to level the playing field so that local businesses can compete fairly.

  • Jeff

    I like the idea of adding sales tax to services and lowering the sale tax rate, after all why should businesses that provide services have an unfair tax advantage over businesses that create products? I think the minimum threshold (proposed at $100) for the sales tax on clothing should be much lower, around $20 since anything above that amount isn’t a bare essential; or we could simply tax all clothing and have a single weekend where clothing is tax free late in the summer to allow families to buy clothing for their kids tax free (other states use this method). Finally, I really dislike the idea that internet sales will include sales tax; when I order something from a different state that is interstate commerce and should be regulated by the federal government. Before the internet existed people used mail-order catalogs (from other states) and you could call up an out of state business, put an order in and those purchases were never taxed; I view internet sales as an extension of those same ideas. Also, when you fill out your MN state taxes you should notice that every single person gets a ~$700 tax free exemption on out of state purchases…I would imagine that internet sales across state lines would fall under that category.

    • GregX

      jeff – >snark< I must say – if, in Minnesota, you can find a $19.99 winter coat that will keep you warm on a day like today … post the link.
      drop the clothing tax % another notch .. and just capture it on all clothing sales.

      • Jeff

        The winter coat is the ONLY piece of clothing where you can use that point…like I said, we can create an exemption for a weekend when you can buy coats or other clothing for kids getting ready for school sales tax free. Although I did actually return a jacket I got for Christmas which cost about $20 at Herberger’s. I guess I’d rather have ONE single item where people have to pay sales tax on that is a bare essential and you only have to buy a winter coat once maybe every 3 years for a kid (I’m still wearing a winter jacket I’ve had for the last 10+ years). That’s much more preferable than exempting all clothing above $20 when most of it is not a bare essential.

  • GregX

    This is a good start. The states economic structure dictates a broader, flatter tax system – and a lowered dependence on income and real-estate taxation. The tax on internet sales and services are welcome as they represent where growth is occurring in the general economy now and for the future.

  • Steve the Cynic

    The exemption of clothing from the sales tax is a relic from the days when clothing was not made in Asian sweat shops and was much more expensive to produce. It makes no sense today and should be completely eliminated. Taxing services will help make the sales tax less regressive, since many of them are luxuries that the rich spend more on as a percentage of income than the poor. Home hair cuts and do-it-yourself car repair are viable options that the poor often choose already.

  • Gary F

    Ooooo, taxes increase on legal services. Seeing that Dems love money from trial lawyers, we’ll see how far that goes.

    Great editorial in the Pioneer Press yesterday about the budget. They get it, even though the Dem’s don’t.

  • rev

    Overall, it’s a good start. I don’t like the internet sales tax, but I greatly appreciate lowering the sales and property tax rates. And the tax on clothing over $100 or $200 is a great idea. But as a single person, I really don’t want to have to pay for kindergarden or any more kids until the school system/administrators (at all levels) get a thorough audit by the IRS.

  • georges

    In order for Minnesota to tax internet sales, we would have to do a complete 180 degree turnaround in how we base such taxes.

    Right now, we base sales taxes on where the SELLER is. The seller must have a physical presence in MN in order for the State to extract a sales tax here. Not physically here, no tax is due, the State has no right to claim a tax, as the seller is not in MN. In order to tax internet sales, we would have to change our thinking and base all sales taxes on where the BUYER lives.

    This is a monumental difference, and would open the door to a whole world of sales taxes nobody wants to see.

    As it is now, if you go to Arizona for the winter, you pay sales taxes in Arizona, at the stores where you buy things. When we begin to base sales taxes on where the buyer lives, you will have to keep accurate records of all your purchases in Arizona, then pay Minnesota the tax due on everything you bought. But but but…..I already paid sales tax in Arizona!!! Tough….this is Minnesota, and we tax your purchases based on the fact that you live here, not on where the purchases occured.
    Going on a trip through Europe? Keep all receipts, checks, credit/debit card transactions, etc., because when you get home you are going to have to pony up the sales tax due to Minnesota on everything you bought or spent money on in Europe……cuz you live here, that’s why. And the State can demand to see your records at any time….to make sure you are paying honestly the tax due.
    Don’t think it won’t happen. Long time Minnesotans will remember in the 80’s when the first seat belt law was passed. There was no fine. The legislature said, We just want the Highway Patrol to be able to stop drivers and remind them to wear their seat belts. There will NEVER be a fine for not wearing your seat belt. Within a year, there was a $25 fine for not wearing a seat belt. Now it is over $100, I believe I have heard.
    Don’t open the door for the State to tax your every purchase, no matter where in the world it is. Keep their big nose outta the tent. Or the whole dam camel will soon be in your house.

    • GregX

      Umm… you may not be aware … but … several states have done the heavy lifting – even gone to court. Yes, the Quill decision is known. As are the solutions to meet its tests.

      1) Software is capable of computing the taxes. It isn’t onerous – in fact FedEx and USPS and DHL can do it now for any of their corporate shipper customers under a logistics contract.

      2) 14-15 states have agreements with the national retailers to user the software after a certain date (2014-1015) if the congress doesn’t create a national internet sales tax.

      3) once 1 or 2 kicks in … pretty much the same will apply to all internet companies big-medium-small. Most small ones will rely on service companies to either provide software or manage the financial transaction and required reporting or payment of taxes.

      and none of your imginary scenarios will play out.

      Believe it.

  • liz

    Good start. The budget leaves the homeless out in the cold. We need housing stability for kids!

  • Mark

    This Dayton Budget good for Target Corp, 3M, etc….I thought the DFL was supposed to be standing up for the middle class and working poor? Where is any of that in the budget proposal?

  • georges

    This idea that the State can declare a day “Tax Holliday Day” would certainly be favorable to the wealthy, and an insult to the poor, who have less available money on any given day to take advantage of the tax-free opportunity.

    The DFL stands up for their buddies, the wealthy and the Government Oligarchy they have put in office.
    The middle class is where they go to get the money to transfer to the above named groups.

    • Steve the Cynic

      And why do you suppose the wealthy more often support the GOP than the DFL? But hey, don’t let the facts get in the way of your ideological rant.

  • georges

    Additionally, don’t be fooled by the numbers game trade-off being proposed as part of the deal to get sales tax on clothing, etc.
    They would only have to reduce the sales tax to 5.5% for a short time, then they could raise it back up to what it was before, or even higher. 8%….9%……whatever they want it to be. And they will then have everything on the sales tax…..no exemptions.
    A word to the wise……

    • GregX

      It could happen. but… I think you are jumping way ahead.
      .
      nearly every state that has adopted this broadening of the tax structure has actually seen more stability in their tax rates than places like MN.

      When there are fewer tax “legs” to stand on (MN) – the legislature is constantly shifting the weight. The complexity of our tax code shows it.

      With more tax legs to stand on – stability is increased and … every sector of the economy is helping out. The old model presumed that services were consuming more goods to deliver services – but if they buy supplies off the internet – that state collects no taxes on the economic activity – but still has to provide services.

      Is there potential for Evil …? Sure .. just look the Catholic Church of America & pedophilia or WallStreet Banks and the mortgage collapse. Trusted partners let us down – and the state could too. But we, the people, don’t own or control the other two.

  • JasonB

    Just an aside; I wish politicians would stop saying “fair share” in discussing taxes. That folksy rhetoric over-simplifies and belies the seriousness of tax inequities. If it works to create a truly “fair” tax system, then fine. But when I hear something that sounds like it’s worded for either an uneducated hayseed or a child, I feel like I’m being played in order to surreptitiously increase the rates overall.

    • Jeff

      I agree completely, stop using terms like “fair” and start describing specifics…”fair” has become a meaningless word that is manipulated to have different definitions based on the individual person’s world viewpoint. Terms like “equal” (treating individuals the exact same way) and describing different percentages (aka unequal) have so much more value in political discussions.

      • GregX

        concur – “fair share” is a vague term. but equal is also loosey-goosey. the necesasry change is to cut the qualitative verbage out. Stick with numbers. It’ll take a bit for the crowd at large to get used to that approach … but most have the skill set.

        • Jeff

          I think equal can be a useful term because it means the same thing to all people. We just need to use it clearly, equal under the law means that the law treats all people the exact same way. Equal rights means the same opportunity not the same results, that means allowing gay people to get married is equal but offering special exceptions for minorities ala affirmative action is inherently not equal. I would just love to hear politicians use that term correctly…when we talk about unequal tax rates I wish they would say UNEQUAL rather than FAIR (which is subjective).

          • JasonB

            Using the term ‘equal’ would in principal be more fair (!) but it can also be manipulative. Flat taxers will say that everyone should be taxed an equal percentage. But taking, say, 10% from someone who makes only $30k a year is not the same as taking 10% from someone making $300K a year. Between the family taking home $27,000 and the one taking home $270,000, I doubt their respective hardships would be ‘equal’.

          • Jeff

            See, you’re changing the term equal to be “fair”. Equal is exactly the same rate…the definition should not change based on the outcome…what you’re referring to is fairness, which is completely subjective. It is not the manipulation of language to use the word equal correctly…your subjective view of hardships goes back to the idea of “fairness”. Equality is equality…we should always strive for equality when it comes to how the government treats different individuals. If you want the government to treat people unequally you should have a very good logical (non-emotional) reason for it.

          • JasonB

            You stated: “we should always strive for equality when it comes to how the government treats different individuals”.

            I would agree if you mean that we should treat individuals in a way that produces equal outcomes. As my tax example illustrates, that does not necessarily mean that applying certain “equal” rules will produce “equality” because we are dealing with “different individuals”.

          • Jeff

            You can never have equal outcomes because so much depends on the individual person. We should strive for equal opportunity and equality under the law but never attempt to produce equal outcomes since that means we would treat different people unequally. Think about it in a game of football, do you really want different rules to be applied so the losing team has a chance to catch up…or would you rather see both teams play by the same set of rules throughout the game. I think we can make equal opportunities happen at the education level, give all people the chance to get basic skills but once they enter the real world of business then we need to treat all companies the same and treat all individuals the same.

          • Steve the Cynic

            Yes, trying to guarantee equal outcomes is a huge mistake, as demonstrated by the failure of the USSR. OTOH, extremely unequal outcomes are just as bad. It was the economic abuse and oppression that existed because of vast inequality that led people to think communism was a good idea in the first place. Overall human well-being is maximized when diversity of outcomes is allowed but somewhat limited by things like unions, minimum wage laws, and progressive income and estate taxes.

          • Jeff

            Yes, I agree that the vast inequality was a bad thing but I would suggest it had more to do with the type of government (monarchy) implementing unfair rules (birth right) that created the inequality…which led to revolution. I think there is a place for government to protect workers through laws specifically designed for worker safety, work time limits and those types of things…which we already have at this point (partially due to unions work of the past). Unions today are not necessary to have a safe job, I have no problem with unions and they should be political creatures and should represent those in the work place who want to have a union represent them…the individual worker should have a choice to join them or not (especially when working for government, since those jobs are by definition monopolies). I have no problem with a slightly progressive income tax but we need to eliminate the loopholes (pretty much all deductions/credits) and lower/flatten the rates…like a 20% (under $250k/year) rate and a 25% (above $250k/year) rate with capital gains taxed the same as regular income. I’m not sure what the purpose of estate taxes are…that is double taxation…that money was most likely already taxed so why on Earth should it be taxed again?

          • Steve the Cynic

            It wasn’t the form of government. Those vast inequalities existed in the USA, too. People forget that one of the key motivations for FDR’s New Deal was to provide just enough redistribution to take the wind out of the sails of a brewing socialist revolution, which actually could have happened here in this country.

            And even if unions per se are not necessary, the threat of unionization is. It’s an important check on the power of big business. Wal-Mart is a tolerable place to work, only because they know they have to keep workers just satisfied enough to make unionizing more trouble than it’s worth. As for public employee unions, there are still a few old women in nursing homes who were forced to quit teaching when they got married, or got pregnant; those abuses were ended by the teachers unions.

            As for estate taxes, the sole purpose is to prevent vast accumulations of inherited wealth. If you believe success should result from merit, why would you object to that?

  • James

    A couple of thoughts.
    Clothing tax. Too complicated: Macy’s will be selling sleeves separate from collars to avoid it. Just tax all clothing down to $0.
    $500 of property tax relief: Terrible idea. Really expensive and a canidly a transfer of wealth from the Twin Cities to outstate. I like cities and towns having to justify their tax rates too. With this gift, I suspect property taxes will drop $500 in Year 1 and bounce right back up in Year 2.
    Higher rates for high earners: Probably okay, as long as it doesn’t get more out of hand. When the federal government raises tax rates and people say they will move to XXXX, they are not telling the truth. When states raise taxes (and don’t provide sufficiently valuable services in return) and people say they will move, some of them actually will.
    7-state Transit Tax: A bit much, on top of everything else. We have pretty good roads and minimal congestion. The constant whining about the state of our roads is mainly from people who have never been out of Minnesota.

  • Bob

    I feel the $500 property tax rebate is a gimmick. Why not just do a permanent property tax cut instead? Could this be a carrot on a stick which will go away a year later? If you’re going to do a reform, don’t go part way. I, for one, am tired of gimmicks.

  • Ann M

    Before we give any money to the University of MN, they should get back the $800,000 that they gave to Norh Carolina. What good does it do if we educate kids and we don’t do anything to encourage job creation? Many of us in smaller cities have seen good paying jobs leave the state–this is very difficult for small cities.Sales tax on clothes doesn’t affect me since I don’t have a job.I go to Salvation Army or just wear old clothes.

  • Jim G

    The Minnesota Miracle was passed by Governor Wendell Anderson, Anoka’s, Charlie Weaver, and a majority Republican legislature in 1971. It survived, relatively unchanged, for more than 30 years until 2002, when the property tax structure was again revised by legislative action. The Republican leadership in 2002 was under Gov. Tim Pawlenty. He must have decided that Minnesota could no longer afford to support the Minnesota Miracle. This ten year project to reorder the financial system of state government worked. It funded an education system that produced one of the most educated and productive work forces in world history. Since 2002, Minnesota began coasting on its laurels and Minnesota’s budget process has been in shambles.

    It’s time to stop coasting on the work of others and begin again. So for me it’s gratifying to see Governor Dayton refocus on the unmet needs of early education, K-12, and Higher Education that the Republicans had put on the back burner for ten years. If this state wants to compete for high paying careers, then it must make sure that our education system is top rate from Early Education right through K-12 to Higher Education. I’m trusting that this Legislature will pass the increases that the Governor’s budget proposes.

    I support the broadening of the sales tax to clothing and services. I’m willing to negotiate which services. I hope the legislature is willing to negotiate also. I applaud the call for higher taxes on the richest Minnesotans. They were paying less as a percentage of their income than the middle income earners: at least now they will pay a higher rate than those average earners do. Democrats need to be responsible, but they need to be Democrats- not current vintage Republicans, remember we voted those guys out.

    • Steve the Cynic

      I agree, except that the unravelling of the state budget began in the Ventura administration, when they started giving away the budget surplus.

      • Jim G

        Noted. I remember that there was a budget gap the following biennium: coincidentally for the same amount that Gov. Ventura had given away.

  • FUBAR

    C’mon, just 1% more on the sales tax and we would have the highest in the nation! Lets go for it!

    • Roy Wehking

      Exactly!