Latest ITEP Policy Briefs Address Minnesota's Tax Debate

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Earlier this year in his State of the State Address, Minnesota Governor Tim Pawlenty announced his plan to create a 21st Century Tax Reform Commission. The 15 member Commission was charged with "providing advice and recommendations to the Governor" on options for revenue-neutral tax reform. The Governor said that "this Commission will specifically focus on improving our job climate by reforming Minnesota's tax laws."

Ensuring that a state's tax structure is able to sustain the challenges of the 21st century goes far beyond a state's business climate. In fact, there's been a lot of talk in Minnesota about how the Governor's Commission is too narrowly focused on corporate concerns. Given this obvious slant, perhaps it's not surprising that in their deliberations members were asked to take into consideration various tax policy principles, including simplicity, competitiveness, efficiency, and stability, but tax fairness didn't make the list!

The Commission is heavily stacked with representatives from the business community. The Minnesota Budget Project's Budget Bites Blog tells us of one especially egregious exchange, "when one member asked what percentage of the state's total revenues come from the corporate income tax... so how much money would the state lose if we eliminated it? 'Seven percent,' was the reply. 'So, if it's just 7 percent, we could live with that,' said the member." Let's hope the Commission moves away from eliminating the corporate income tax, which is projected to bring in $1.9 billion in revenue for FY 08-09.

In slightly more hopeful news, testimony heard earlier this month by the Commission included a discussion of broadening the sales tax base to include more services and applying the sales tax to items purchased online. If enacted, both of these changes would modernize the state's tax structure. For more see ITEP's latest policy briefs on sales tax base expansion and taxing internet sales.

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