A Taxpayers’ Bill of Goods
December 10th, 2009 at 10:17 am By Jeff Van Wychen
Earlier this week, the Senate Tax Committee met to discuss the Governor’s proposal to amend the constitution to cap state spending. The state already has a constitutional requirement to balance the state budget; all Pawlenty’s amendment would do is require that general fund spending in the current biennium equal the revenues generated in the last biennium. Thus, if there’s a deficit, the problem could only be solved by cutting spending, not increasing revenue, thereby reducing the options open to state policymakers, restricting the ability of government to respond to the demands of the public, and ensuring that the “no new tax” tribe win every dispute on deficits.
At one point during the Senate Tax Committee discussion of the amendment, Senator Tom Bakk (Cook) said that income taxes and the overall “price of government” (i.e., total state and local own-source revenue as a percent of statewide personal income) has declined over the last decade. To this point, Senator Warren Limmer (Maple Grove), an amendment supporter, argued that sales taxes and property taxes have increased in recent years.
Both senators were correct. While specific taxes have increased, others have declined and the overall size of government relative to statewide personal income has declined. Sadly for low and moderate income families, regressive taxes (sales and property taxes) have increased as a share of total public revenue, while progressive taxes (the income tax) have shrunk. These trends have shifted a larger share of state taxes on to those families with the least ability to pay.
While Senator Limmer is certainly correct that property taxes have increased, Pawlenty’s constitutional spending amendment will only accelerate this trend. During the “no new tax” era, state government has solved its recurring budget problems largely by cutting state dollars shared with counties, cities, and schools, thereby compelling local governments to simultaneously cut budgets while increasing property taxes. The fiscal straightjacket imposed by the amendment will constitutionally guarantee similar outcomes in the future; the state will not be able to solve any portion of its deficit problem through an increase in state taxes, so it will of necessity continue to chop away at the property tax relief dollars that the state shares with local governments. This will cause even more public costs to be shifted on to low and moderate income families.
Pawlenty’s constitutional spending cap falls under the broad category of proposals known collectively as “taxpayers’ bill of rights.” Dane Smith, President of Growth & Justice, hit the nail on the head when he told the Senate Tax Committee that the proposed constitutional amendment could be more aptly called a “taxpayers’ bill of goods.”
Tags: budget deficit, constitutional spending cap, property tax relief, property taxes, regressive taxes, regressivity, state general fund, Taxes
The latest “preposterous” proposal from the Governor proposes that a constitutional amendment be put to the people in November that would simply limit spending to what the state takes in tax revenue. In other words, the state would look at the taxes collected in the previous biennium and limit expenditures to that amount. So, if a budget period brought in $31 billion in tax revenue, the state couldn’t spend more than $31 billion in the next biennium. What a radical idea! The reason the state staggers from budget “crisis” to budget “crisis” is because it bases its future budgets on what it thinks it will spend instead of basing it on what it receives.
The state is projected to spend about $31 billion from the general fund in fiscal year 2010-2011. In 2012-2013, the projected spending figure is $38 billion, a $7 billion increase. Why the additional $7billion? Because the budget planners think this is what the state will want to spend. No consideration is given to what we actually have to spend. Does any business or any family budget this way? If your family has an annual income of $75,000 do you base your budget on $100,000? If your business has annual sales of $5 million do you build a business plan based on sales of $8 million? Government has it backwards. Time for government to budget based on what’s in the checkbook. I say we put it to a vote, let the people decide for once, not the pundits, what is best.
Mr. Bauhof:
The $7 billion general fund growth from FY 2010-11 to FY 2012-13 is not a true apples to apples comparison, because much of the federal recovery dollars received by state show up in the form of reduced general fund spending, thereby artificially deflating actual general fund spending in FY 2010-11 and creating the illusion of large spending growth from FY 2010-11 to FY 2012-13. In constant dollars, per capita state general fund spending for the FY 2012-13 biennium is projected to be less than it was a decade earlier in FY 2002-03.
Your analogy to the family budget doesn’t work in this situation. My family’s spending decisions will be based on what we make this year, not on what we made two years ago. It is asinine to impose a restriction on state government that no family would tolerate.
The constitutional amendment would guarantee that all deficits in the current biennium would have to be resolved entirely through spending cuts with no revenue increases, even if this approach has no support among the public. If you feel that your position is strong, you should be able to win the debate through the democratic process, rather than through a constitutional amendment that would permanently skew the state budget process in favor of an anti-government minority.
What you say in irony, I say with conviction: the proposed amendment is indeed “preposterous” and “radical.” Incidentally, in the future please refrain from replying to multiple blog posts with the identical response.