In an email release dated Dec. 3 from “Pawlenty for Governor,” the governor states in part —
“We cannot tax our way to prosperity. The best way to stimulate the economy is to leave as much money as possible in the hands of hard-working Minnesota families.
“Some relief can come in the form of closing a tax loophole for foreign corporations. This is a fair thing to do and brings Minnesota in line with how the federal government taxes such corporations.
“Every time the suggestion is made to close this loophole, the Democrats want to use the money generated by the change for more government spending. No surprise there. They always want to spend more. I think we should use the money to provide relief directly to Minnesota taxpayers. “
“The governor is playing the ‘health-impact fee’ game again,” says Minnesota Free Market Institute Senior Policy Fellow Craig Westover.
“First,” says Westover, ” the FOC tax issue (FOC stands for “Foreign Operating Corporations) is not a tax on “foreign corporations.” It is a tax on Minnesota corporations with “foreign operating” units. Second, it is not a “loophole. A “loophole” is an unintended consequence of legislation. The FOC legislation was an intentional act on the part of the legislature to make Minnesota a little less daunting place to do business. If it is now a good thing to change that policy, so bet it, but it is not “closing a loophole”; it is raising a tax. Let’s be honest.
“The third paragraph is also bothersome. The governor is playing the politics of the Democrats. After accusing the Democrats of wanting to raise corporate taxes (we’re being honest, remember) and raise government spending, i.e. spending on their constituencies, Pawlenty proposes to raise corporate taxes (we’re still being honest), take money from one group and spend it on his constituency – just because that constituency is ‘us’ doesn’t make it right.
“A fiscal conservative is a fiscal conservative in principle, not just when it’s convenient.”
See also “Michael R. Wigley: Witness the conscience of a liberal: It ain’t pretty” Published in the Star Tribune, Nov. 27, 2007.
Sturdevant employs an obvious bit of pop psychology, attempting to seduce Gov. Tim Pawlenty into changing the foreign corporation tax rules and generating about $125 million per year for the state by calling it “the closing of an unintended tax law loophole,” not a new tax.
Changing the rule would be a tax increase because the rule is not an oversight. It was a conscious decision by the Legislature, including the DFL, to head off an exodus of businesses from Minnesota to more tax-friendly states.
Sturdevant reveals a final point about the liberal modus operandi when she writes that the governor can keep reform hopes alive if “he’s willing close some loopholes, raise some fees, or otherwise ‘enhance revenue’ for reform’s sake. If he makes common cause with reform-minded DFLers, he might even get them to refrain from spelling his ideas t-a-x.”