Will the DFL ever get it or don’t they care?

Two themes came out of the recent announcement that the budget surplus was no longer $1.5B.  One was that the economy was slowing and the other pointed to declining tax revenue collections.

The two may well have some common threads, but let’s just look at lesser tax collections. It takes taxable income to form a pool of money that governments can nibble at. However, if you eat the goose that lays the taxable golden eggs, that pool will eventually dry up. Then what?

Let’s concentrate on the personal income tax for now.  The income mostly falls into two major categories—earned and passive.  A person might earn W-2 employee wages or some form of self-employment type profits that become the equivalent of wages.

Passive income may come from sauces such as earnings from savings and investments where personal labor input is not a factor.  Obviously, the more passive income a person has, the greater the opportunity to gather more tax revenues.  This normally falls into a definition of wealth.  The wealthier or richer a taxpayer is, the greater the likelihood that more tax revenues will be generated.  Elementary, Mr. Watson.

Salaries depend on the business and job climate.  We are of the view that the two are inseparable.  A favorable business climate means job creation is out there.  A favorable and friendly business environment leads to an active economy with more private spending and more tax revenues.

Minnesota, unfortunately, ranks as a very high tax state.  Wealth is a favorite whipping boy for the liberals. It amounts to class warfare which we would like to label as economic identity politics (EIP).  It’s a great vote getter for political campaigns to bash the wealthy, the rich, and the business class.  The message is clear-get out of Dodge.  Those that leave, leave with tax revenues that Minnesota could have collected.  The DFL knows that at some point of excessive taxation, those hit the hardest will become incentivized to leave the state.  Some will but most will put up with it so the Democrats could care less what they do to the rich s.o.b.’s.  Tough bounce.  Don’t forget to shut the door on your way out.  This is backwards.  We need the wealthiest to stay here, spend a lot of money to bolster the economy, fund job creation and pay reasonable taxes.

What this brings us to is perhaps it’s time to sensibly examine the sources of tax revenues and develop trend lines.  Take the personal income tax and go through it bracket by bracket.  What does that say?  If revenues are sliding in the top bracket, is that a red flag? Are capital gains leaving us?  What’s going on with the numbers of taxpayers?  What are the factual tea leaves indicating?

The fact that the “surplus” is evaporating is a good thing.  Less revenue puts pressure on more spending.  Increasing taxes does not mean more overall revenue.  Minnesota is reaching the outer limits of overall taxation.  More may well shackle our economy and future prosperity for our citizens.

We have suggested before and will again.  If you want more stable and growing tax revenues, don’t raise taxes and invent new ones—lower them.  Repeal the 2013 tax increases on businesses and individuals, repeal the estate tax, exempt social security benefits from taxation and knock off bashing private enterprise and the wealthy. Encourage former residents who have fled Minnesota to use and pay for the entire professional and other services they can find here without fear of reclassifying their non-resident status. That means more work for Minnesotans living here, more income and low, and behold, more taxes to pay.

Bob Smith 3^rd

Gopher State Politics Institute

March 2, 2019