Wednesday, November 30, 2011

Revenue future: Minnesota's dilemma

A two hour meeting with Mankato businesspeople and Minnesota Commissioner of Revenue Myron Franz revealed some surprises.

Business people were willing to "give up" some exemptions like sales tax rebate on capital equipment, willing to have legal services taxed, willing to give up somebody else's property tax break, in exchange for reforming tax code, mostly away from the property tax.

Franz told the group that Gov. Mark Dayton was "committed" to Minnesota tax reform but wants to gather information from public meetings around the state, from Republicans and Democrats, and then make a proposal for reform in 2013.

He said Dayton was a "taskmaster" who works very hard and doesn't want his advisors to sugarcoat anything.

Franz produced the prop of a three legged stool with each leg representing property tax, income tax and sales taxes. The percentage that state gets from each was proporotional to the length of each leg of the stool. A few years ago, the stool was pretty even and it stood up.

Now, with property tax making up almost 40 percent of all government revenue, the stool fell over. Interesting visual.

Most of the feedback on what needs to be fixed centered around the property tax. One business owner said three of her properties had increases of 20 percent. A manufacturing plant faced an increase of 7 percent.

Another business owner said their taxes were up 43 percent.

The commissioner and his staff will be traveling to dozens of cities throughout Minnesota in the next year where they will meet with businesspeople and host evening Town Hall meetings for the public.

In a conversation with members of The Free Press editorial board after the meeting, Franz said the Legislature gives the revenue commissioner a number to increase collections by and it goes into the state budget forecast.

That number is $83 million for this biennium. So Frans has to hire staff and figure out where to find $83 million and Legislators even push for more. But it will be a number he has to answer to.

The meeting was organized by Greater Mankato Growth.

Tuesday, November 29, 2011

Bank bailout done in secrecy: an outrageous story

There's a great story on Bloomberg financial news online that details the bank bailouts of 2008, the need to keep it secret from taxpayers footing the bill, and the sort of arrogance that must have come with people making these decisions.

Here's the story.

In my mind, the big bank bailout is ranking right up there with the biggest scams of all time.

It is most troubling because it tears down the notion that we all live in an America where hard work is rewarded and we all take the same personal and financial risks when we screw up in business or the workplace.

Not so with some of these big banks, and I mean big banks. We should not confuse these folks with your average small-town banker or even bigger regional banks.

These were the biggest of  the bigs and the Bloomberg story shows they had not only influence, but more or less protection from the mean results of capitalism gone bad, something all the rest of us and our families must face without the government protecting us.

Then, they not only didn't pay the price for their mistakes, they were rewarded with low interest taxpayer loans where they turned around and made $13 billion.

 At one point, Fed Chairman Ben Bernanke is saying that he didn't want to release the names of the banks getting taxpayer money because of the "stigma" it would create.

That explanation is not going to fly with folks who face the "stigma" of unemployment and home foreclosures.

The Bloomberg story is what good journalism is all about. It takes on powerful interests, (Bloomberg sued the fed and the big banks for two years and finally won its Freedom of Information case), and exposes their evil to the governed.

You will not get this kind of journalism from a blogger or a political organization posing as a news organization.

Ohio Congressman Sherrod Brown called the story one that would unite the Tea Party and Occupy Wall Street.

I couldn't agree more.

Tuesday, November 22, 2011

The federal deficit: remembering how we got here

 A story on NPR this morning reminded listeners about important and surprising facts we may have forgotten about how we got the current federal deficit, and how we got into this mess.

A few of the surprises: It wasn't just Democrats against the proposed Bush tax cuts in personal income and especially capital gains. Norm Orenstein, of the conservative American Enterprise Institutes, reminds people he and others said at the time that the cuts in capital gains taxes were going to be a huge drain on federal revenues.

This was in and around 2000-2002. Says Orenstein: "Guess what, it was a huge drain on federal revenues."

In 2000, we had a $200 billion federal surplus. Now, it's in the area of $1.5 trillion., a seven-fold increase.

But we continued to cut taxes, and it is important to remember that the Bush tax cuts that were recently extended, had to be put through with the same, some say shady, parliamentary procedure they used to get the health care reform through Congress - the fuzzy "reconciliation" process.

Another surprise: the report reminded people that Allen Greenspan was saying paying down all our debt would have negative economic implications, would hurt growth.

But doing a little research shows that seven House Democrats and 2 Senate Democrats voted for the Bush tax cuts in 2003. One Republican in the House and one in the Senate voted no.

This will be instructive when the votes comes at the end of 2012 whether or not to extend the cuts. As someone who is schooled in economics, it seems to me there hasbeen enough time to examine whether these tax cuts "worked" in other words, did they create jobs. I would say no. Did they help keep the jobs that were already there? Possibly.

The tax cuts did put more money in the pockets of Americans instead of paying taxes. That's a given, but there was apparently so much "capacity" in the currently existing economy, no new jobs were needed to satisfy the increased consumer spending.

That's not surprising given a job market where one person is now doing the work that used to be done by two or three people.

Monday, November 21, 2011

Property tax confusion part 2

By now a lot of folks have received their property tax statements and are  probably most surprised by the lower value of their property and the higher taxes.

We heard of one case where a farmer said their taxes went up 100 percent.

The values are confusing because they compare last year's "market" value, a close proximity to the real value of your property and this year's tax value, which is not really a "market" value.

There's a sliding scale by which the new property tax law put into place by state lawmakers reduces your property value, but for tax purposes only.

For a home value of $76,000, the new law reduces the value of the property for tax purposes by about $30,000. For a $150,000 home, the new law reduces the value of the property for tax purposes by about $24,000.

Again, the value shows up as a value for tax purposes, but it's not very clear to most folks. So a lot of folks are looking at a value and seeing their home or business has declined in value.

In many cases, taxes also will go up, even if the local government did not change their rates or levies one bit.

The Legislature did this because they eliminated that tax credit they provided local governments, known as market value tax credit.

But the bottom line is they still cut tax relief. The market value credit was worth about $261 million in tax relief state wide, and they replaced with the exclusion credit, but that had the impact of lowering overall county tax bases.

So if they tax base is lower and the county's levy stays the same, taxes still go up in many, many cases.

Wednesday, November 16, 2011

Property tax increases will stun homeowners

In a few days homeowners will get their property tax statements, formerly known as Truth in Taxation statements.

There are likely to be some big surprises.

The state budget deal agreed to last year by the Republican Legislature and Gov. Mark Dayton removed what is called the Market Value Credit.

Basically, it was a formula for reducing the property tax people and business paid. The local governments reduced your tax bill and were reimbursed for that by the state with a payment directly to the local government.


But it was usually only partially funded. So, the governments ended up giving a state mandated property tax break, but were rarely reimbursed for the full amount.

But eliminating the credit helped reduce last year's $1.5 to $2 billion deficit by about $261 million. And that is about how much property taxes will go up in aggregate this year, according to estimates by the Minnesota Inter-County Association.

The Legislature did try to mitigate this hit by providing what's called an "exclusion" to certain property. Basically they changed the state law on how local government's must calculate the value of your property and the tax.

Whereas, for example, a property that used to be valued at $76,000, will be valued at $46,000, thereby reducing the tax owed on that property.

But what people are likely to see on their tax bill is lower home value and higher taxes. The higher taxes come from local government having to set higher levies to make up for the loss of market value money. That will be a real shock.

As I've said before, the property tax is one tax where Minnesota is far below other states, so it's the one tax we could raise and still be "competitive."

But this is not likely to go over well. Tax increases will be 5, 10, 15 percent and most of the small towns and suburban areas will be hit hardest, locales that generally vote Republican.

It's going to be an interesting election.

Monday, November 14, 2011

Everything politics, economy, taxes

Minnesota Republicans have today proposed a property tax relief program costing $80 million for next session.

That's to mitigate what are expected to be some pretty hefty increases in business and residential property taxes coming in notices the next few weeks.

The reduction and removal of the market value homestead credit helped plug a $1 billion plus budget hole last year and was part of the agreement between Democratic Gov. Mark Dayton and the Republicans who controlled the Legislature.

Unlike years past, where property tax increases could be passed off on the local governments as a tangential reaction to the state, this year, the state Legislature actually did increase the rate at which property is taxed. No argument.

So, that message is getting through to lots of taxpayers. I'd be a little worried if I were an outstate Republican in a district that has in the past been represented by the other party.

The announcement of the property tax relief program today tells me two things: one, Republicans really believe they will be blamed for property tax increases this year, and two, they're already hearing about it from constituencies, like business, that know the higher property taxes are coming.

Republicans also will be faced with their own suburban-rural split in support. Typically, small town and outstate Minnesota have supported Republicans, but what some of those outstate legislators are now realizing their suburban brethren and leaders may not be in sync with constituencies of outstate legislators when it comes to property tax and local government aid.

Many can still not live down how they voted against an LGA compromise years ago, that would have been fair to outstate Minnesota. They were convinced by then "suburban brethren" led by a guy named Tim Pawlenty to vote against the compromise plan by Dan Dorman, a Republican from Albert Lea.

Actually, of all the taxes Minnesotans face, we rank lowest in property taxes, something like 37 to 47 if I remember right. So, logically, property taxes are the place where we could raise money and still be "competitive" with other states.

But property taxes and the "most public" of all taxes. Everyone can see what you pay. So they can really be a political hammer when used against those who raise them.

And Republican legislators and Dayton will not be able to escape the blame. Most legislative Democrats, however, can say they voted against the final bill, which is mostly true.

Thursday, November 10, 2011

CNBC Republican debate offered more than CNN

The CNBC Republican Presidential Debate Wednesday night was far superior in my mind to two debates hosted by CNN.

CNBC's Maria Bartiromo and CNBC's Chief Washington Correspondent John Harwood moderated and did a great job. I liked that they stopped candidates who either weren't really answering the question (which happens a lot) or resorted to talking points.

 And they cut candidates short if they were refusing to answer questions, like Newt Gingrich.


You could tell Bartiromo and Harwood were very knowledgeable about the issues.

It was also refreshing when they brought in several other CNBC correspondents to ask a question or two. The financial reporter and the personal finance reporter offered especially unique questions that matter.


They also focused on money issues, which was really a great idea. I think they probably garnered more viewership because Americans are really focused on the economy in this election, not social issues and even not much about foreign affairs.


CNN's two debate, one hosted by Wolf Blitzer and the other by Anderson Cooper were OK, but they did seem to let the candidates get away with not answering questions, and focused more on trying to bait candidates to attack each other.

Both networks hosted the debates with political entities. They CNN debate hosted one with the Tea Party and CNBC hosted this one with the Michigan Republican Party. I still don't care for such partnerships. The hosting also stacks the audience to be partisan, so if people don't make the connection, they assume a general audience is clapping for every talking point or sound bite.

I don't often agree with Michele Bachmann, but she complimented the CNBC hosts afterward saying she thought they did a good job hosting the debate, getting at substantive issues and not "baiting" the candidates to attack each other like the other recent debates.

To that, I agree.

Wednesday, November 2, 2011

Hallelujah: Congress just got sensible

I've often said the political polarization in our country among leading political figures occurs because our society and media rewards political leaders for rhetoric, not reason, for combativeness not cooperation.

Well there are 100 members of Congress, 40 Republicans and 60 Democrats, who I am going to try to reward for their cooperation and their reason.

These members of the House recently sent a letter to the so called deficit reduction "supercommittee" to simply consider all options, including new revenue, in helping to solve the federal deficit problem.

They also, wisely, recommended the budget committee trim the deficit by $4 trillion over 10  years, far  beyond the mandate they have to trim $1.2 trillion.

Here's the story.
Here's the letter.

Of Minnesota's congressional delegation signing the letter were Tim Walz, D, 1st District, Collin Peterson, D, 7th District,

So thumbs up to them.

Not signing including Republicans Chip Cravaack and Erik Paulsen and Michele Bachmann and Democrats Betty McCollum and Keith Ellison.

And thumbs down to them.

Republicans signatories may have taken the larger risk in signing this letter. They face the wrath of not only the tea party, but of political kingpin Grover Norquist, who got several of them to sign his pledge not to raise taxes.

I admire the courage of Republican Congresswoman Cynthia Lummis, R-Wyo who has tea party support and was a signer of the no tax pledge in 2008, but not last year.

She would prefer to solve the deficit she said, without raising taxes, but realizes there is more at stake her than ideology and we do not live in an ideal world.

Her quote from national story: "This is not an ideal world." She said the national debt is a problem created by Republicans and Democrats, and both parties must solve it. She said she is not "an absolute `hell no' person when it comes to considering all options.

 "Grover Norquist is not in my district," she said. "I represent the state of Wyoming and its people."


Norquist seemed for one time in his life to be silenced. He didn't return calls to the Associated Press.

Many others signed the letter, many took political risks in doing so.

Reps. Heath Shuler, D-N.C., and Mike Simpson, R-Idaho, organized the letter.

Said Shuler: "I'll give up my election. I'll give up my seat" in exchange for an agreement to improve the country's fiscal future, he told the Associated Press.

Shuler gets on my A-list for most courageous political statement of the year.

Democrats signing the letter put entitlement reform and cuts on the line.

Democrat Rep. Peter Welch, D-Vt., "Those of us who are the strongest supporters of entitlement programs have to be at the table to guarantee sustainability," Rep. Peter Welch, D-Vt., said in an interview. "If we stand on the sidelines, those programs will be in enormous jeopardy."

Finally, some Congressional action we can reward. Others would do well to take their lead seriously.

Tuesday, November 1, 2011

It's "snow decision" in North Mankato

The North Mankato City Council is debating snow plowing policies for this year with the choice between being nice and saving taxpayers money.

Maybe, I'm turning in the abominable snowman here, but I vote for saving taxpayers money.

The choice is between running a traditional snow emergency and ticketing cars that are violating parking rules even though they've been given fair warning and city plow crews going back and back again, waiting for reluctant vehicles and recalcitrant owners to move them.

A lot of other cities have snow emergencies. They can't afford overtime paid snow plow crews going again and again over streets waiting for owners to move their cars. Mankato doesn't do it. North Mankato shouldn't either.

Mankato has done everything possible to notify residents of the danger of being towed. They can sign up for text messages and the like.

There's plenty of opportunities for residents to comply.

North Mankato has been a bit reluctant to give its residents some "tough love" when it comes to snowplowing because so many have complained when it happens.

But many of those same taxpayers are saying North Mankato suffers from excessive municipal spending. They can't have it both ways.

A city can only do so much. Fair warning is fair warning. North Mankato has the right, and indeed the obligation, to save taxpayers money by "getting 'er done."

No whining.