Growth & Justice Blog

A different tone in this year's tax committee hearings, and a clear consensus for more and fairer revenue

I've heard infinite versions of "don't tax me''  or "taxing me or my customers more will destroy my business AND the economy'' in my decades under the dome.   And last week's opposition at a House hearing to ending sales tax exemptions on business services was typical in many respects.   Just because these fears often turn out unfounded _ our economy was performing better, in the 1990s,  when taxes were higher  _ doesn't mean these specific concerns shouldn't be heeded.   

But I don't recall ever hearing as many tax opponents acknowledge, as they made their sincere case against losing tax exemptions on their own business, that our communities do need more revenue for public investment and for dealing with demographic challenges.    Time after time I heard these business owners or their association leaders, who are also citizens,  say that they supported or understood the need for more revenue, just "please, not on me or my customers, this time.''  And when all the opponents got through testifying, alternating one-for-one with those who favored the governor's plan, there were still more testifiers left who favored the reasonable increases in Dayton's plan, and the badly needed investments on the budget side, from early childhood education to transportation to workforce training.   I didn't hear nearly as many angry diatribes against government and taxes in general as I've heard in previous years.

That consensus for more revenue comes through in the Star Tribune's Sunday poll, showing  once again that a majority favor restoring higher income tax rates on the highest income margins, while opinion is evely divided on expanding the sales tax base to more consumer services.   A clear majority opposes ending the exemptions for so-called "business-to-business'' services.

This consensus for "reasonably more'' actually is not new.   Polls show support for revenue sufficiency was strong all through the 12 years of rule by one governor whose slogan was  "give it all back'' and another whose central theme was "no new taxes,'' and  legislative majorities that took the same hard and uncompromising line in 2011-2012.   Especially after budget crises began recurring regularly in 2001 and beyond, polls consistently showed that most Minnesotans thought revenue increases ought to be at least part of the solution for budget shortfalls.  That happened also to be the position of almost all former governors in all three parties through that period.    And in almost every reputable poll I've seen, most Minnesotans think those who have been reaping almost all the benefits of increased productivity in recent years, and who have been paying a smaller percentage of their big increases  in state-local taxes, ought to contribute reasonably more.

 

Dane Smith   

 

 

A week for reflection and commitment to justice and broader prosperity (and yes, taxes and public investments help do that)

We have this week a confluence of events that ought to lift our hopes and sharpen our resolve to reduce racial and economic inequality in our state and nation,  and to build a more inclusive prosperity.

The hope comes from the momentous coincidence today of Martin Luther King's official birthday observance and a re-inauguration, after a convincing re-election,  of the first African-American president of the United States.    Michelle Obama, a descendant of slaves, is the First Lady of a White House that once was occupied by white slave-holders, and actually built by slaves.   This is a remarkable country, capable of extraordinary self-correction, powerful and wealthy because it is governed by its own people, and stronger yet when ALL its people are empowered.  We can  expect President Obama will build on the theme in his inauguration speech that we all do better when we ALL do better.    While the Obamas have succeeded spectacularly, far too many people of color are still left behind, and economic disparities continue to grow between top incomes and families of all races in the middle-income brackets.

In Minnesota, attention swivels on Tuesday to the release of both a two-year state budget proposal and a major tax system overhual from Gov. Mark Dayton.    Minnesota's prosperity rests on an innovative business leadership, to be sure, but also on a  foundation of public investment, in the form of high-quality public education,  physical public works infrastructure, public health and natural resource protection.   We need to invest more and more effectively in those things, including early childhood education and post-secondary training,  and Gov. Dayton can be expected to emphasize that this broader prosperity and better government is the end we seek, while taxes merely are one of the  means.   Minnesotans understand these fundamentals and have long been distinguished by a commitment to public good, as well as private gain.   Let's try to keep this in our heads as we all get ready to argue over the details.

Dane Smith

 

 

How we can help the poor help themselves, and our economy, Selvaggio-style

Joe Selvaggio is a celebrated former priest who has spent nearly half a century helping poor folks become more productive and less poor,  lately through the MicroGrants program and before that, Project for Pride in Living. 

He also recently authored one of the most inspiring and articulate cases I've ever seen for investing in the human potential of our large and growing underclass.   His powerful essay appeared in the Star Tribune on Sunday Nov. 18, and was headlined "Think of the poor as part of the solution: They're a source of economic growth. That's why we can afford to help them.''

Selvaggio is the soul of charity but he's not a naive do-gooder who sees poor folks as purely victims.  And he argues that they ultimately are responsible for grabbing on and pulling up on the hands that are  offered from public and non-profit workforce training providers.  And he also concludes that governments need to invest more in broad-based self-sufficiency and productivity efforts instead of just focusing on direct aid and entitlements.    Citing the success of the Harlem Children's Zone and other non-profits such as Twin Cities Rise! and Summit Academy OIC, Selvaggio notes:  

"Entitlements seem to be anathema to the right, left and center.  But job-training programs are politically acceptable to left, right and center.   The private nonprofit sector has proven that they work, but philanthropy can't do it alone.  Now it's time for government to put muscle behind them...Change the paradigm and think of the poor as locked in a cocoon, ready to develop into a productive creator of wealth.''

Our policy-makers in Minnesota need to find what's working best in in preparing and moving chronically unemployed or under-employed folks in to the decent jobs that are being created in our new economy and right in their communities,  whether it's health-care, transportation, financial industries, or construction.   Growth & Justice is beginning a project that will illuminate those models.   And our legislators and other elected officials must be ready and willing to invest in them.   Because this really is an investment that pays off for everybody.

 

Dane Smith   

 

 

A seasoned conservative briliantly explains the larger historic sweep

Some of the most interesting election aftermath analysis is coming from seasoned conservatives with a broader view of the sweep of history, and nobody since Nov. 6 has laid this out with more panoramic vision than David Frum. In this CNN excerpt from his larger explanation of why Romney lost, Frum dismantles the notion perpetrated by many on Fox News, and Mitt Romney himself, that America is now lost to entitlement "takers."

"America is not a society divided between 'makers'' and 'takers.' Instead, almost all of us proceed through a life cycle where we sometimes make and sometimes take, as we pass from schooling to employment to retirement. The line between 'making' and 'taking' is not a racial line. The biggest government program we have, Medicare, benefits a population that is 85% white...The United States did not vote for socialism. It could not do so, because neither party offers socialism. Both parties champion a free enterprise economy cushioned by a certain amount of social insurance. The Democrats (mostly) want more social insurance; the Republicans want less. National politics is a contest to move the line of scrimmage, in a game where there's no such thing as a forward pass, only a straight charge ahead at the defensive line [and] whatever you think of the Obama record, it's worth keeping in mind that by any measure, free enterprise has been winning the game for a long, long time to this point."

Frum then describes in some detail 50 years of movement away from government regulation and high marginal federal income tax rates, which happened under Democrats and Republicans. He notes that Marxism was still a live intellectual force in the early 1960s and is now in complete retreat and disrespute internationally. Frum doesen't get into the most important underlying fact of all: the alleged "makers" in the top 1 percent (or 5 percent or 10 percent) have "taken" almost all the growth in the economy over the last decade and now have a greater share of income and wealth than at any time since the Great Depression.

Finally, Frum harshly chastises the racial animosity implied in some post-election commentary and his points remind me of the more embracing brand of Republican philosophy that prevailed in Minnesota from our early statehood under Abraham Lincoln (can't wait to see the movie), through Govs. John S. Pillsbury, Harold Stassen and  Arne Carlson.

"To assume from the start that only certain ethnicities will contribute, and that others aspire only to grab, is not only ugly prejudice; it is also self-destructive delusion. People of all backgrounds want to create, save and contribute to society. A party of the center-right should make them all feel at home, regardless of how they pronounce their last name, the complexion of their skin or the way in which they express love and build family...We need more sensible conservatives. As for the feeble conservatives, they should take a couple of aspirin and then stay quietly indoors until the temper has subsided and they are ready to say and do something useful again."

Amen.

--Dane Smith

 

 

Voters want the reasonable middle ground

Elections can be a surprise, and this latest was for me, on both the national and state level, a very pleasant surprise. I've been weary of the "devil take the hindmost" style of political brinkmanship that seems to have become commonplace in Washington and at the State Capitol. I don't care who's to blame, or even that everyone or no one is to blame. I just want a group of legislators willing and able to identify the plights of the people -- all the people -- and addressing them with creative, nonpartisan solutions that are effective and cost efficient.

One thing our recent elections show is that the voting public, as an electorate, is only several degrees on either side of middle ground. And, our votes will swing in favor of one party or the other based on how far the party in power has strayed from the middle. We are not against government, but only ineffective, inefficient government that wastes tax dollars. We are not against regulation, but want regulations that are patently fair, reasonable, non-discriminatory and not arbitrary. And, we are not at all against taxes, but only taxes that burden us without adequate demonstration that our tax dollars are being spent efficiently for the good of all.

The clear message to politicians everywhere is that they don't stray too far from the middle. The people want government and expenditures focused on things that matter to the mainstream, and that both improve lives and make it easier to live, work and play in their own communities. Our newly elected political leaders should be thinking long and hard about that, and less or not at all about sticking it to the other political parties for paritsan gain.

--David F. Fisher

(Note: David F. Fisher is a new member of the Growth & Justice Board of Directors, and is Executive Director of the Corporate Institute at the University of Minnesota Law School. He was commissioner of the Minnesota Department of Administration under Independence Party Gov. Jesse Ventura.)

Stunning victory for voting rights and civil rights, and historic perspective on partisan control

Two big obvious takeaways from Nov. 6.

By larger margins than anyone dreamed possible, Minnesotans rejected proposed amendments to the state constitution that would have done damage to voting rights, civil rights and human rights in Minnesota. It truly was a historic day, perhaps a turning point, as Minnesota moves forward to re-establish its reputation as a progressive and tolerant state, one that aims to realize the full potential of all its people.

And as a political reporter whose job it was to offer analysis after elections, I'm wondering whether someone will assess what may be a historic level of partisan control. I've noticed a couple media reports noting that the Legislature and governor's office are in DFL hands for the first time since 1990. But with control now of both U.S. Senate seats (Republicans had both U.S. Senate seats through the 1980s), both chambers in the Legislature, all statewide constitutional offices, and 5 of 8 congressional seats, this may be the most landscape controlled by the DFL since the late 1970s. Hubris and arrogance about a mandate are not advised. In 1978, Republicans swept back in to power with the Minnesota Massacre, in a harbinger of the "Reagan Revolution" nationally two years later.

--Dane Smith

 

Author of "So Rich, So Poor'' brings truths about poverty to Minnesota

I have the great privilege of introducing author Peter Edelman Tuesday evening to talk about his powerful new book, "So Rich, So Poor: Why It's So Hard to End Poverty in America." Edelman is a Georgetown University law professor who has served at the pinnacles of power, as an adviser to U.S. Sen. Robert Kennedy and in President Bill Clinton's administration. He may be most famous for resigning from the Clinton administration to protest the deep cuts to benefits and eligibility limits in Clinton's welfare "reform'' package in the mid 1990s. His book is a primer on the disgraceful prevalence of poverty in the world's wealthiest and most powerful nation. It's also one of the most misunderstood issues in our body politic. The compelling fact that Edelman drove home in a recent New York Times editorial is this: the failure of the private sector to adequately reward people who work hard for their living is by far the biggest driver of poverty and low-income status. Most poor people work and a whopping 104 million people -- a third of our population -- have annual incomes below twice the poverty line, or less than $38,000 for a family of three. A fourth of all jobs pay below the poverty line for a family of four, or less than $23,000 annually. As the world's only wealthy democracy without universal health care, and with some of the chintziest economic security benefits in the western world, our working poor and our disabled poor are signficantly worse off than the poor in all the so-called developed nations. Edelman will talk about his book at 7 p.m. on Tuesday Oct. 2 at Common Good Books, at the corner of Grand and Snelling in St. Paul.

--Dane Smith

Bad news day for the Voter Restriction & Suppression Amendment

We can only hope that voters are catching on fast to the more overlooked of two very wrongheaded constitutional amendments on the ballot this fall, and the Star Tribune Sunday illuminated the huge downside of the so-called Voter ID amendment (more accurately labeled as the Voter Restriction & Suppression Amendment).

Veteran political reporter Jim Ragsdale wrote an incisive front-page piece explaining how an estimated 215,000 voters — disproportionately the elderly, homeless veterans, the poor, college students, people of color and newer residents, all eligible voters — currently lack the "valid" ID that would be required if the amendment is enacted. And then on another Strib section cover, Lori Sturdevant in her Op-Ex column broke the important news that on the voter amendment, unlike the marriage amendment, Lutherans and Catholics are united in opposition. At least the leaders of those two faiths' social service agencies agree that the amendment will discourage or prevent vulnerable, but perfectly eligible, voters from exercising their democratic rights.

I like the way Tim Marx, leader of Catholic Charites of St. Paul and Minneapolis, explained the benefits of voting for those disadvantaged people described in Christian faiths as "the least among us."

"What is so affirming about about watching our residents vote is seeing the sense of dignity and pride they get. In spite of being in poverty, they get a chance to feel the dignity of full participation in society. That tends to make them want to more fully participate economically and socially. To deprive them of that opportunity would be a real tragedy."

Bottom line is that the new restrictions would likely inhibit or prevent voting by thousands of perfectly eligible voters, all for the purpose of catching an extremely small number of ineligible voters (mostly felons who have served their prison time but are on parole), many of whom are not aware they are breaking the law.

—Dane Smith

Wonkish Ryan's budget specifics take center stage

Congressman Paul Ryan is routinely described as a "wonk." And all of us policy enthusiasts have to like the new focus on substance--budgets and taxes and who gets how much--that's likely to occur with the naming of a fellow wonk as Mitt Romney's running mate.

Conservative and liberal commentators also agree that the choice of Ryan signals a harder turn by Romney toward a more specific anti-tax, anti-government policy agenda. It reflects an even more pronounced valuing of private interests over public interests on the GOP side, and perhaps the strongest attack since before the 1930s on our federal government's fundamental role in providing economic security for all Americans.

The best and most comprehensive critique of Ryanism, and the spectacular claim to be able to reduce the federal deficit by cutting taxes, can be found at the Center on Budget and Policy Priorities (CBPP) blog post headlined "Everything You Need to Know About Chairman Ryan's Budget.''

Here's how CBPP President Robert Greenstein summarized the Ryan blueprint: "It would likely produce the largest redistribution of income from the bottom to the top in modern U.S. history and likely increase poverty and inequality more than any other budget in recent times (and possibly in the nation’s history)."

The ramifications for Minnesota of the Ryan budget were teased out of the CBPP studies late last week by the Minnesota Budget Project (MBP). The MBP reported that "Minnesota would lose an estimated $420 million in federal funding for education, law enforcement, clean water, and other state and local priorities in 2014 under the House-passed Ryan budget...The total impact from 2013 to 2021 would be a loss of $3.8 billion in federal funding to Minnesota and local communities."

Meanwhile, on the libertarian end of the spectrum, the Cato Institute is much more bullish on Ryan's budget, but Cato also faults him for inconsistency and for not taking a similar whack at the huge military-industrial complex that taxpayers support through military spending.

It's common knowledge that Ayn Rand, the novelist and amateur philosopher who worshipped capitalists as godlike Atlases to whom everything was owed, has had strong influence on Rep. Ryan. The New Yorker reminds us that her novel, Atlas Shrugged, once was required reading for his staff. But Ryan has since attempted to disavow Rand, in large part because of her militant atheism and utter contempt for religion and the altruistic values of Ryan's Catholic faith. The American Values Network offers an intriguing challenge to Christians to choose between Ayn Rand and Jesus Christ.

--Dane Smith

 

 

Inequality, education and innovation: U.S. higher on the first, slipping on the other two

Sometimes the anti-tax, anti-government zealots will actually concede that the United States is an outlier in economic inequality and becoming more unequal all the time. But they hasten to insist that this is a function of a meritocracy, and that our weak economic security system and low taxes foster creativity, initiative and innovation, from which all boats will rise.

But during a period marked by historic tax cuts and federal-state disinvestment in education, the U.S. has slipped in average education attainment (largely provided by taxes and government) and there are signs it may be slipping in innovation too.

The U.S. has dropped to 10th on the Global Innovaton Index, behind nations such as Sweden, Finland, Denmark, the U.K. and the Netherlands, all with much superior economic security entitlement. The index is an annual analysis published by Insead, an international business school, and the World Intellectual Property Organization, a United Nations Agency. The index is comprehensive and takes into account dozens of factors, including business sophistication, human capital and research, and creative output.

I like the analysis on these rankings by Education Week blogger Jason Tomassini, who says this:

"So, if we didn't know already, in order to create innovators through education we need to increase rigor in Science, Technology, Engineering, and Math instruction; teach students business acumen and entrepreneurship; and lower class sizes. Get to it!

Oh, and there's another factor we should watch out for: We are No. 2 in the world in video uploads to YouTube. According to the Global Innovation Index, this is a good thing, but I can't see the harm in dropping a few spots before next year." 

Let's allow that there might be a trade-off for public-sector size and private-sector growth rates, and in the extreme too much government and prohibitive tax rates might well stifle creativity and incentive.   I personally think people tend to be more creative and productive when they are relatively secure, and know they will have health care and enough to eat, even if they take a risk and fail. That's how a retired Swedish businessman explained it to me when I visited there three years ago, as I wrote in an op-ed column inspired by his creative analogy of economic efficiency to humane handling of hunting dogs.

--Dane Smith