Swedzinski: Dayton should rethink tax proposal in light of new figures

MARSHALL – Minnesota, like most other states, has seen deficit after deficit come and go, and its Legislature has waged many a battle in coming up with the best ways to balance the budget. And even though another deficit hovers over the Capitol, it’s not as big of a cloud as it has been in recent years.

The Department of Minnesota Management and Budget released the latest economic forecast Thursday that shows the projected budget deficit has been dropped to $627 million, some 40 percent lower that was experts had projected in November ($1.090 billion for the 2014-15 biennium). Revenues are now forecast to be $36 billion, or $323 million more than earlier estimates, MMB said.

“Much, much better numbers,” District 16A Rep. Chris Swedzinski, R-Ghent, said of the newly-released forecast. “We’ll have hundreds of millions of dollars to put back into schools so we can drop that shift back down.”

Of the projected $295 million surplus for the current biennium, most if not all will be used to pay back Minnesota schools from previous funding shifts – just one of the Band-Aids that has been used to balance the budget every year. After this payback, $801 million in school shifts will remain.

Republicans like Swedzinski see the reduced deficit as an opportunity for Democrat Gov. Mark Dayton to change his widely-criticized tax-heavy approach to his proposed budget. Dayton wants to raise revenue with new taxes with a new income tax rate and an tax increase to things like cigarettes and clothing items over $100. He also has proposed lowering the sales tax rate to 5.5 percent, down from 6.875 percent, cutting the basic corporate tax rate, putting a lock on business property taxes and giving homeowners a $500 property tax rebate.

“I really think the new numbers point to the fact that the governor really should start rethinking his tax proposal,” Swedzinski said. “This shows you don’t have to raise taxes to increase jobs and improve the economy. Even having his proposal on the table is paralyzing potential job creation in the state.”

Swedzinski said even some Democrats have shied away from Dayton’s budget proposal and said numerous people, including many concerned business owners, have testified to the tax committee about the effects of his proposal.

“I sat in on the committee meeting and they heard testimony from 7:30 this morning until 12:30 (p.m.) about how the governor’s proposed taxes will negatively affect them. There was some positive testimony, too, but the vast majority said it would affect them negatively,” he said.

Even though Minnesota’s exposure to the sequester would be less damaging than what other states would feel, local lawmakers are also keeping an eye on goings on in Washington, D.C., as the sequester, and a possible federal government shutdown, nears. The deadline for avoiding the $85 billion in cuts is today.

Estimates from MMB show that federal sequester cuts would reduce Minnesota’s employment growth by no more than 5,000 jobs by the end of the year. While other states might be worse off should the sequester become a reality, the economy nonetheless would be left with little cushion against further shocks, MMB said.

“I’ve been following it; it’s really the elephant in the room so to speak,” Swedzinski said. “We spend $10 billion a day in our federal government; we have to start moving toward limiting government spending at the federal level. We’re told we have to raise taxes on the rich, but we are still not raising money. We have to control spending.”