Minnesota could force school children to sell more candy bars. Or, the state could get serious and finally close corporate tax loopholes that leech billions of dollars from the state and its schools, Service Employees International Union Local 284 argued Tuesday.

In a legislative news conference that featured both nitty-gritty fiscal detail and an unforgettable image, Local 284 officials pointed out that the state has a constitutional obligation to support public schools. It's time that Gov. Tim Pawlenty and the Legislature make that promise a priority, they said. Then they showed just how the state could do that ? and more.

Special treatment is never reviewed
Local 284 represents 9,000 school support employees, including bus drivers, cafeteria workers, custodians and teachers aides. Its members witness every day how the state's budget cuts affect schools and students, said executive director Shane Allers.

Members of SEIU Local 284 made their point Tuesday: School children will have to sell $400 million more worth of candy bars if the state doesn?t close corporate loopholes. Union Advocate photo

Surrounded by stacks of cartons representing $400 million worth of candy bars, Allers urged lawmakers to move their debate beyond simply cutting spending or raising tax rates.

Instead, he said, the state should look at a third category, which the Revenue Department calls "tax expenditures."

These are targeted, preferential tax treatments that cost the state billions in revenue but are never reviewed as part of the normal two-year budget process.

These preferential treatments go untouched, sometimes for decades, and can be changed only by changing state law, said Janelle Rau-Clauson, political director for Local 284. Rau-Clauson said lawmakers need to review them all and eliminate many of them.

"These ought to be subject to review," Allers said. "They should not be treated as a corporate entitlement."

Some tax breaks serve public good
Allers said the state gives $17 billion in tax breaks that meet the definition of tax expenditures. Many of these can be justified as serving the public good, he said, so even if the Legislature reviews them, they are likely to survive.

But SEIU also identified $5.7 billion that it considers corporate tax loopholes or corporate welfare. That's four times more than the state needs to erase its projected $1.4 billion budget deficit, leaving plenty left over to support the $400 million in additional funding that Local 284 says public schools need just to keep up with inflation.

SEIU listed nearly four dozen categories in which businesses get favorable treatment. The loopholes vary, but include special language in how they can write off or deduct costs; how they can arrange their expenses, depreciation or accounting; where they get direct tax credits; and where they are exempt from paying sales taxes on their purchases, or where sales taxes are not charged on goods or services they produce.

Where?s the balance?
By keeping the tax loopholes, Rau-Clauson said, the state is saying it's more important to preserve corporate welfare than to preserve adequate school funding or health care for workers. "Is it more important to give a tax break to ski areas, or to support K-12 education?" she asked.

Janelle Rau-Clauson: "Is it more important to give a tax break to ski areas, or to support K-12 education?" Union Advocate photo

Ski areas, for example, don't have to pay sales tax on much of the equipment they purchase. All kinds of other purchases and services are exempt from sales taxes, including horses, commercial logging equipment, certain specialized manufacturing tools, ready-mix concrete trucks, the production of television commercials and out-of-state advertising, and newspapers, magazines and many other publications. Magazines and timber companies are among businesses that can deduct specialized expenses. Income that companies make from sales out-of-state or overseas often is taxed at a lower rate. Research and development costs, insurance companies, fraternal benefit societies, and businesses that operate in designated enterprise zones also have loopholes created just for them.

"Our schools have to do more with less," Allers said. "We only ask that those who benefit from corporate welfare do their fair share."

Michael Kuchta edits the Union Advocate, the official publication of the St. Paul Trades & Labor Assembly, AFL-CIO. E-mail him at advocate@mtn.org