The Minnesota Free Market Institute Weekly Update

Friday, May 8, 2009

In This Issue
Get It Done!
Tax Rally Coverage
Raising Taxes in a Recession Doesn’t Help to Close the Disparity Gap
Must Reads
In Case You Missed it from the Minnesota Free Market Institute
Budget Hawks 3: The Final Showdown is May 14
Get It Done!
On Wednesday, House Speaker Margaret Anderson Kelliher (D-Minneapolis) admitted that the Minnesota House of Representatives will miss tonights deadline for committee bills.  With less than two weeks to go, the legislature is no closer to resolving the budget crises than they were four months ago.

You would have thought that by now, the House and Senate would have ironed out their differences, plopped a huge, and ultimately vetoed, tax increase bill on Governor Pawlenty’s desk and been long since back at work negotiating something all parties can agree to support.

It’s now May 7th and the DFL-led House can’t get their own bills out of committee, much less come to an agreement with the Senate on spending targets and on which taxes to increase.

Perhaps that’s because they know the public doesn’t want them to balance their budgets on the backs of our families – especially at a time when we are all struggling.

It’s time to end the gamesmanship and get the job done.  May 18th is just around the corner.

Pat Anderson is President of the Minnesota Free Market Institute

Tax Cut Rally Coverage

Estimates for last Saturday’s Tax Cut Rally ranged from 5000-7000 people. The weather was perfect. Thanks to many of you stopped by the Minnesota Free Market Institute booth!
Click here to see a gallery of photos taken at the rally
Adam Axvig is the Web Master of the Minnesota Free Market Institute

Raising Taxes in a Recession Doesn’t Help to Close the Disparity Gap

Reacting to the tax-cut rally that attracted thousands of Minnesota families to the state capitol in St. Paul, Dane Smith, president of the progressive think tank Growth & Justice told the Pioneer Press, “The fact is we have a budget crisis of historic proportions, and if we don’t raise a reasonable amount of revenue to continue funding vital public investments, we will threaten our prospects for long-term prosperity, A reasonable return to tax levels from a few years ago is necessary…”
The juxtaposition of the thousands of  middle-class Minnesota families rallying for tax cuts and Smith’s progressive call for higher taxes to provide for ‘vital public investments’ is something of a disconnect. The rally turnout is evidence a lot of Minnesotans don’t see a lot of the investments that Legislators want to make with a lot of their money as being the least bit ‘vital.’ Progressive legislators are like the ever over-exuberant Boy Scout who drags the little old lady across the street whether she wants to cross it or not. The turnout at the tax rally shows that street-wise Minnesotans understand excessively high taxes damage the quality of life, and they aren’t about to be dragged down by an over-exuberant Legislature intent on earning its progressive merit badge.
The budget battle is not as simplistic, however, as cutting spending or cutting taxes.There are trade-offs between a tax system based on economic principle, tax burden and efficiency objectives and a tax system that Smith and progressive legislators propose motivated by distributional effects and equity objectives.
A tax system based on economic principle requires tax reform away from narrow high-rate taxes like personal income taxes and business taxes to a more broad-based low-rate tax system. Such reform appears regressive, but it is simply more transparent. Business taxes, for example, are passed onto consumers in the form of higher prices. Every food product and every item of clothing sold in Minnesota bears the hidden tax inherent in high business tax rates and costs imposed on business by high personal income tax rates. Progressive tax reform would raise personal income tax rates, which while appearing more “fair,” only compounds the problem of hidden taxes on items like food and clothing.
Progressives argue we ought to make our tax system “fairer,” but ultimately “ought” implies “can.” Raising taxes, in a recession or any other time, cannot solve the income disparity gap progressives are trying to close. Economic principles always prevail; increasing income taxes increases salary gaps, it does not decrease them. It’s time for the Legislature to craft tax reform based on economics, not wishful thinking. Craig Westover is a Senior Policy Fellow at the Minnesota Free Market Institute

Must Reads

President’s Nontaxpaying Base Is Intact Investor’s Business Daily

This editorial reviews recent polling on support for President Obama between taxpayers and non-taxpayers. Not only are non-taxpayers “some of Obama’s most enthusiastic supporters” but there are strong differences between taxpayers and non-taxpayers on other policy issues.

In Case You Missed It from the Minnesota Free Market Institute

Craig Westover

John LaPlante State House Call

King Banaian SCSU Scholars

Budget Hawks 3: The Final Showdown is May 14
Join us for the third event which is timed to coincide with the end of the legislative session on Thursday, May 14 from 5-8 PM at Trocaderos in Minneapolis. Cash bar but munchies will be provided.  See the flyer here for details on free parking and for more information about the event. Although it’s not required, you can RSVP on facebook here.

Notable Quotes

No man’s life, liberty, or property is safe while the legislature is in session.
Mark Twain (1866)
Talk is cheap…except when Congress does it.
— Anonymous

The government is like a baby’s alimentary canal, with a happy appetite at one end and no responsibility at the other. — Ronald Reagan

The inherent vice of capitalism is the unequal sharing of the blessings. The inherent blessing of socialism is the equal sharing of misery. –Winston Churchill

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