A Minnesota Senate plan would salvage state funding for education, health care and other vital services by closing a key corporate tax loophole and creating a tax surcharge on the state's 42,000 wealthiest residents.
The plan, which passed the Senate May 6, basically makes the state's richest people "pay their fair share," said Brad Lehto, legislative director for the Minnesota AFL-CIO. "Folks who make over a half a million are the ones who get nailed."
The Senate plan sets up a showdown between Gov. Tim Pawlenty's "no new taxes" ideology and those who say the state must raise revenue ? not keep cutting basic services ? to fix its ongoing budget deficits.
Pawlenty called the Senate plan "profoundly stupid."
But the state AFL-CIO, in a statement emailed to activists, said: "The governor's budget plans aren't fixing the state's budget problems. They can't. They're based on gimmicks, shifts and accounting tricks."
Making taxes part of the solution, the AFL-CIO said, is necessary "to stop the service cuts that are eating away at Minnesota's schools, nursing homes, day-care centers, roads, affordable housing initiatives, health-care services and our state?s economy as a whole."
Minnesota is Watching ? a coalition of labor unions, faith groups and nonprofits ? emphasized the same points. In a statement prepared for a news conference on May 11, the coalition said: "Raising taxes is reasonable. We need it. We can afford it."
The Senate plan would create a temporary top tax rate of 10.65 percent for individuals making more than $166,000 and married couples making more than $250,000. That would raise an estimated $795 million for the state's next two-year budget. At the same time, the plan would adjust other tax brackets, giving a typical Minnesota household a $60-$70 reduction in state taxes, said Wayne Cox, executive director of Minnesota Citizens for Tax Justice.
Even with the top-tier tax surcharge, the state's wealthiest residents still hang on to more than 80 percent of the tax cuts they've received at the state and federal levels since 1999, Cox said.
The Senate plan also would raise $197 million by eliminating a de facto freeze on the statewide business property tax, and raise $231 million by closing a loophole in which Minnesota corporations dodge state taxes by falsely claiming some of their revenue comes from foreign subsidiaries, Cox said.
The Senate uses the new revenue primarily to preserve support for schools and health care. Here's a quick glimpse at some of the differences in Senate and House budget proposals:
Health care
? The House throws 30,000 working adults off state health insurance; the Senate makes sure that they and 17,000 others remain eligible to buy into the MinnesotaCare program. "These are tax-paying, premium-paying, working people," the AFL-CIO's Lehto said.
? The Senate abolishes a $5,000 limit on benefits under MinnesotaCare, a limit the House retains.
? The Senate increases the basic per pupil formula by $231 in the 2006 budget year, and by an additional $221 in 2007, to $5,503. The House increases the formula by $284 overall. The House approach, Cox said, won't give school districts enough money to even retain the same level of services they now provide. The Senate approach, he said, "at least allows districts not to go backwards."
? The House shifts $4 million that has gone to districts with high concentrations of students from poor families, such as in Minneapolis and St. Paul. Property taxes
? The Senate would forbid local governments from raising property taxes in 2007, a tactic supporters say would illustrate the hypocrisy and tax shifts required under Pawlenty. The AFL-CIO's Lehto calls it a "high-stakes gamble" that could seriously harm cities, counties, school districts and local public employees.
? The House cuts $27 million more in local government aid to Minneapolis and St. Paul, then says the cities can make up the revenue by raising local sales tax by half a cent.
? The House follows Pawlenty's lead and reduces the state Renters' Credit by 45 percent. For eligible renters, the credit now averages $554. State workers
? The House, the Senate and the governor all want to cut funding for state government, which most likely means more state workers will lose their jobs. But the Senate adds a salary supplement for state employees. The supplement, totaling $21 million, is roughly equal to a 1 percent raise for state workers, who have gone two years without a general pay increase.
Adapted from The Union Advocate, the official newspaper of the St. Paul Trades and Labor Assembly. E-mail The Advocate at: advocate@mtn.org
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A Minnesota Senate plan would salvage state funding for education, health care and other vital services by closing a key corporate tax loophole and creating a tax surcharge on the state’s 42,000 wealthiest residents.
The plan, which passed the Senate May 6, basically makes the state’s richest people “pay their fair share,” said Brad Lehto, legislative director for the Minnesota AFL-CIO. “Folks who make over a half a million are the ones who get nailed.”
The Senate plan sets up a showdown between Gov. Tim Pawlenty’s “no new taxes” ideology and those who say the state must raise revenue ? not keep cutting basic services ? to fix its ongoing budget deficits.
Pawlenty called the Senate plan “profoundly stupid.”
But the state AFL-CIO, in a statement emailed to activists, said: “The governor’s budget plans aren’t fixing the state’s budget problems. They can’t. They’re based on gimmicks, shifts and accounting tricks.”
Making taxes part of the solution, the AFL-CIO said, is necessary “to stop the service cuts that are eating away at Minnesota’s schools, nursing homes, day-care centers, roads, affordable housing initiatives, health-care services and our state?s economy as a whole.”
Minnesota is Watching ? a coalition of labor unions, faith groups and nonprofits ? emphasized the same points. In a statement prepared for a news conference on May 11, the coalition said: “Raising taxes is reasonable. We need it. We can afford it.”
The Senate plan would create a temporary top tax rate of 10.65 percent for individuals making more than $166,000 and married couples making more than $250,000. That would raise an estimated $795 million for the state’s next two-year budget. At the same time, the plan would adjust other tax brackets, giving a typical Minnesota household a $60-$70 reduction in state taxes, said Wayne Cox, executive director of Minnesota Citizens for Tax Justice.
Even with the top-tier tax surcharge, the state’s wealthiest residents still hang on to more than 80 percent of the tax cuts they’ve received at the state and federal levels since 1999, Cox said.
The Senate plan also would raise $197 million by eliminating a de facto freeze on the statewide business property tax, and raise $231 million by closing a loophole in which Minnesota corporations dodge state taxes by falsely claiming some of their revenue comes from foreign subsidiaries, Cox said.
The Senate uses the new revenue primarily to preserve support for schools and health care. Here’s a quick glimpse at some of the differences in Senate and House budget proposals:
Health care
? The House throws 30,000 working adults off state health insurance; the Senate makes sure that they and 17,000 others remain eligible to buy into the MinnesotaCare program. “These are tax-paying, premium-paying, working people,” the AFL-CIO’s Lehto said.
? The Senate abolishes a $5,000 limit on benefits under MinnesotaCare, a limit the House retains.
K-12 education
? The Senate increases the basic per pupil formula by $231 in the 2006 budget year, and by an additional $221 in 2007, to $5,503. The House increases the formula by $284 overall. The House approach, Cox said, won’t give school districts enough money to even retain the same level of services they now provide. The Senate approach, he said, “at least allows districts not to go backwards.”
? The House shifts $4 million that has gone to districts with high concentrations of students from poor families, such as in Minneapolis and St. Paul.
Property taxes
? The Senate would forbid local governments from raising property taxes in 2007, a tactic supporters say would illustrate the hypocrisy and tax shifts required under Pawlenty. The AFL-CIO’s Lehto calls it a “high-stakes gamble” that could seriously harm cities, counties, school districts and local public employees.
? The House cuts $27 million more in local government aid to Minneapolis and St. Paul, then says the cities can make up the revenue by raising local sales tax by half a cent.
? The House follows Pawlenty’s lead and reduces the state Renters’ Credit by 45 percent. For eligible renters, the credit now averages $554.
State workers
? The House, the Senate and the governor all want to cut funding for state government, which most likely means more state workers will lose their jobs. But the Senate adds a salary supplement for state employees. The supplement, totaling $21 million, is roughly equal to a 1 percent raise for state workers, who have gone two years without a general pay increase.
Adapted from The Union Advocate, the official newspaper of the St. Paul Trades and Labor Assembly. E-mail The Advocate at: advocate@mtn.org