Budget crisis should bring out the best thinking

This has been Think Tank Week on the Star Tribune's op/ed page. 

We could find something to agree with in the Center of the American Experiment's thoughts on Green JOBZ, which tracks pretty closely with what we wrote last month. And we're in accord with Mitch Pearlstein when he says the state budget crisis calls for smart solutions — and even being open to the possibility of a tax increase.

With Phil Krinkie and the Taxpayers League of Minnesota, though, we must vigorously disagree. His response to Dane Smith's recent opinion piece on the coming budget challenges reiterated the Taxpayers League's tried and not-so-true talking points.

Dane made three points. 

1. Our local and state governments already have been significantly downsized — as a share of the economy, as a percentage of our income, and relative to other states.
2. Top-earning Minnesotans pay a smaller percentage of income in state and local taxes than other income brackets, even as their share of wealth and income  has grown larger than ever.
3. Minnesota, in its new status as an average-tax state, is chronically underperforming the national economy for the first time in decades.

These points were backed up by comprehensive tax-and-spending measurements that Krinkie called "deceptive percentages."  He prefers to use what he calls "real dollars." In fact, Krinkie's tally of real dollars spent in Minnesota in fiscal 1998 does not appear to be real at all in the economic sense. Economists use "real dollars" to refer to inflation-adjusted amounts. He presents "nominal'' dollars, unadjusted for inflation or population growth, as a way to track the size of government.

Why do he and other anti-tax advocates reject percentages? Because then their argument about bloated government doesn't play very well. Using nominal dollars lets them inflate the bloat. Adjusting for population growth, size of the economy, individual incomes and the cost of the things government buys gives a much more realistic picture. And it's the kind of measurement most economists use when comparing nations and states, and then vs. now.

Here's an example. You might not like having a larger mortgage payment on your second house than on your first one, but if the payment takes the same or a smaller proportion of your growing income and the house is larger, it's pretty hard to argue you are paying more and are worse off.  

Never mind, says Krinkie:

The fact is, the price of government as a percentage of income is economically irrelevant. Validity of a POG index assumes that government is entitled to some arbitrary percentage of private production. You work hard, earn more, and government is entitled to more of your income.

The League's dissing of the POG might be taken as an insult to the state's business establishment, which was instrumental in installing the POG as a bottom-line defining measurement of government's size some two decades ago. If the business view is "economically irrelevant," then we're really in trouble!

Actually, a POG index simply shows us what we spent at different times in our history for a certain level of government services. It's a measure that allows taxpayers to compare now with then. If we don't like what's happening now, and we're funding public services at a lower level than at a time we liked better, we might consider raising taxes. And if we're spending less now and liking it more, we should re-elect the people who got us there. 

Of course, "liberals in the Legislature" are to blame for point #2, says former legislator Krinkie, because the government has imposed some regressive taxes. No mention of how regressive property taxes actually grew so much in recent years in response to cuts in income taxes and less state revenue for local governments.   

And no acknowledgment of the Taxpayers League's role in helping to make progressive income tax policy politically toxic in Minnesota.

In fact, Growth & Justice has been among the state's strongest voices for limiting regressive taxes and for finding ways to offset their impact on lower-income families. Conservatives have made income tax increases their Alamo, while more easily giving ground on regressive fees, sales and property taxes.

On point #3, the best our righty friends can do on the state's lagging growth is to agree and then haul out the discredited talking point about how state and federal government employment growth has displaced private job creation. We laid out the facts on that one back when Rep. Marty Seifert tried it in January.

Sparring with each other can be fun, but Minnesota's policy groups from across the political spectrum ought to be bringing workable ideas, straightforward information and good will to the table in the coming months. We'll need it.

— Charlie Quimby