Sen. Kiscaden: Legislative Update 11
"Features"06/16/2005
1- SPECIAL SESSION: TIME TO COMPROMISE
2- FAIRNESS = TAX INCREASE FOR THE WEALTHY?
3- SPECIAL SESSION SCHEDULE
1- IT’S TIME FOR EVERYONE TO COMPROMISE
To end the special session by June 30, it is very important for the State Legislature and the Governor to work together to develop a budget that will be fiscally responsible while addressing the budget shortfall.
To do this, the Senate, House and Governor must stop bickering and seek a balanced approach. While the state needs to reduce spending for services, we must also look for new revenue, and we must avoid transferring costs for state services to local property taxes. How can this be achieved? Through compromise on the part of the Senate, House, and Governor.
I chair the State Government Budget Committee. Despite huge differences between the House and Senate proposals, we were able to finish our budget bill within the course of the regular session with a budget target lower than the Governor’s original proposed budget target. The Senate and the House did have to make some cuts in services and state agencies, but we were able to give additional money to our military men and women along with our Veterans.
As the Senate committee members met with the House committee members and the Governor, we worked through each issue area without partisanship. As a result, the State Government budget committee ended with a strong budget with strong support in both legislative bodies.
Now, it is time to do the same for the rest of the state budget.
I support and applaud the Governor’s proposal to get new state revenue by increasing the “fee” or tax on tobacco products. His proposal would raise $360 million dollars of new state revenue. This new revenue goes a long way in solving our budget problems; however, other stumbling blocks remain.
Substantial differences exist in the area of health care. The Governor and the House are proposing to eliminate health insurance for thousands of working adults who are low-income and do not have insurance through their employers. This health insurance is paid by premiums and a 2 percent provider tax on health care services. The provider tax is currently dedicated to paying for health care services, but Governor and the House propose to spend those tax revenues elsewhere in the budget.
Not only does the Governor and House proposal break a promise, it leads to budget problems down the road. Senate Democrats have made a proposal
to keep everyone insured by continuing to use the 2 percent provider tax for health care expenses. This idea has strong merit and Republicans should seek to make it work.
The issue of funding for K-12 education has also been contentious, but the two sides are close. All parties agree state funding for K-12 education cannot remain flat. The key question is will the state transfer costs of K-12 education back onto local property taxes. Experience shows that relying on property taxes creates funding problems for school districts, and property taxes do have an impact on people with fixed incomes as well as businesses. Democrats oppose using property taxes to finance K-12 education.
The Senate Democrats continue to propose a temporary increase in income taxes for those Minnesotans with the highest incomes. This is a fairness issue since wealthy Minnesotans actually pay a lower percentage of their income in taxes than middle class families. Democrats have lowered their proposed income tax increase but refuse to abandon it. It appears Republicans disagree.
The other big sticking point is transportation funding. The House and Senate agreed and passed a ten cent gas tax increase along with other changes to increase funding since Minnesota has a significant backlog in transportation projects. The Governor refuses to agree to a gas tax increase, even with broad consensus across the state that an increase in the gas tax (which was last increased in 1988) is acceptable. The Governor needs to allow a gas tax increase given the strong statewide support and the well-documented transportation needs.
Politics requires working through strongly held differences to find solutions that advance the common good. This requires compromise. There is a time to hold one’s position, and there is time to reach agreement. It is time for the Governor and our legislative leaders to reach that agreement.
2- FAIRNESS = INCOME TAX INCREASE FOR THE WEALTHY?
Why are Democrats so adamant about a tax increase being a fairness issue? There are hard facts to look at; it is not just about political philosophy or strategy.
The 2005 Minnesota Tax Incidence Study conducted by the Department of Revenue shows that statewide the total state and local taxes as a percentage of personal income is 11.1%. For the wealthiest 5% of households, it is 10.5%, and for the wealthiest l% of Minnesotans it is only 9.0%.
The study also shows that by 2007, it will drop even further for these high income Minnesotans to 10% for the top 5% of earners and 8.5% for those with the very highest incomes. That is why Democrats see a tax increase as a tax fairness issue. The proposal to temporarily increase the tax on this top 1% still leaves the wealthiest below the statewide average of 11.1% of personal income.
We tend to forget that just a few years ago; we were reducing taxes in Minnesota.
Here is a link to data from the Institute on Taxation and Economic Policy that deals specifically with Minnesota:
http://www/itepnet.org/wp2000/mn%20pr.pdf
The graph on page 4 of this document shows that from 1989 to 2002, the highest income household in Minnesota received much more tax relief than other households.
To be fair, it should be noted that a tobacco tax or “fee” increase, which over 70% of Minnesotans support, falls heavily on lower income Minnesotans. Fixed fees or taxes are regressive in that they are not adjusted based on income, so the lower income the higher percentage it takes to pay the fee or tax. Additionally, evidence shows more smokers are among lower income Minnesotans. As a side note, I do support an increase in the cigarette tax because of the positive impact on personal health and health care costs.
3- SPECIAL SESSION SCHEDULE:
There has been very little activity during this special session for legislators who are not on one of the four remaining budget conference committees.
Representative Fran Bradley is in the thick of negotiations for the Health and Human Services budget; Senator Steve Murphy, from Red Wing, is chairing the transportation negotiations. The rest of legislators from our area are pursuing other activities and keeping one eye on the negotiations. We make comments from time to time to our leaders and our colleagues. We are frequently briefed on progress, but we are also forced to wait while the negotiating teams work things through.
Most of us are not at the Capitol, we have returned to our other work and responsibilities. In my case, I have returned to graduate school. Last year I received a Bush Fellowship and have been working on a graduate degree. I am scheduled to finish school this summer. I have spent the last three weeks in school, but I have been able to follow legislative developments via e-mail, calls and the internet. I am as up to date on developments as much as if I were in Rochester.
You can reach me via my regular e-mail, or my legislative assistant Pat Rooney can be reached toll-free at 1-800-657-3770.
Hope you are enjoying the long-awaited sunny summer days.
Best regards,
Sheila Kiscaden
Senator Sheila Kiscaden
District 30
325 Capitol
St. Paul, MN 55155
651-296-4848