Monday, January 25, 2010

To raise taxes or not to raise taxes, that is the question.

The Star Tribune ran a story Sunday entitled, "Governor's race is all about taxes. Minnesota's budget budget picture is so bleak that some candidates are already discussing tax increases". The big issue in the governor's race and the elephant in the room is whether or not to raise taxes to close an expected $5.4 billion budget deficit in the next biennium.
Talk of tax increases can sink a gubernatorial candidate during good times.

These are not good times.

That's why the message that major DFL candidates are offering recession-weary Minnesota voters seems so unlikely: We must raise taxes, because cuts alone can't do it.

GOP candidates say the state must manage without taxes, or risk further economic malaise.

The painful solution may end up somewhere in between. Minnesota faces a $5.4 billion shortfall through 2013, which amounts to a staggering $1,038 for every man, woman and child if nothing else changed.

Of course, Representative Tom Rukavina says anybody who says they will not raise taxes is either a liar or stupid.

"Anybody saying you can do it with cuts -- on either side of the aisle -- is a liar or stupid," said state Rep. Tom Rukavina, a DFL candidate for governor.

But even assuming Democrats are willing to go 50/50 tax increases and spending cuts, that's still a $2,000 tax increase on a family of four. Those are big bucks.

The problem is up to now the hope was the economy would strengthen and there wouldn't need to be tax increases. Or more likely, we've built in structural deficits resulting from built in spending increases unsustainable with our current tax base. Now with the financial crisis and deep recession the problem has only worsened.

I think fundamentally government is too big and doing too many things. From the bureaucratic nature of public education and public universities to skyrocketing health care costs, we've been living beyond our means. Government needs to do things differently. And of course necessity is the mother of invention.

I wonder if the public isn't ready for a return to simpler and smaller government. We'll certainly see how it plays out in the governor's race and in the next several years at the legislature.

1 comment:

Anona said...

The way Minnesota got into to as much trouble as we are in is because of one of your "lesser gov types" Pawlenty.

You made the mess, and you are not able or willing to clean it up or take responsibility.

the norm it seems.