Almanac: At the Capitol

As I wrote in my previous column in this space, I think that the DFL leadership in the Senate and, to a lesser degree, the House has made a strategical error in the formulation of their budget plans. Ceding the language of "America's highest income tax bracket" is an almost inexcusable mistake and the accompanying sales tax increases don't help the cause. That being said, the Governor has led us down a path that leaves us at a crucial juncture with only two options: raise revenue or dismantle Minnesota's legendary quality of life.

Slowly but surely I think Minnesotans are beginning to wake up to this reality. Whether it's the extra minutes each day that your commute is taking from your home-life, the steady decline of our public school system relative to the rest of the nation, or the ever increasing sting of the property tax bill, everybody is starting to see and feel the pinch. Which is where the state legislature's slight fumble finds its silver lining: a renewed interest in debating the merits of the tax code.

As you may or may not know, I produce a radio show on AM950 called "Minnesota Matters" (Live M-F 5-7pm!!), and after a few months of discussing the legislature's budget plans I can tell you that the most sure-fire way to get people to call-in is to start talking about taxes. We don't even have to talk about tax-hikes, a mere mention of the "tax" word is enough to get every person with a pulse to pick up the phone and try to get their opinion on the air. To some degree I anticipated this level of interest in the subject, but what I didn't anticipate was the intensity of the response. A few people might call to opine on the merits of various solutions but then, inevitably, a rabidly anti-tax individual will call in to enumerate the reasons that the government has no right dipping its hand in his purse and the flood gates open on calls.

The responses to the tax question both on the show and on the street are as varied as the range of plans before the legislature, but I have picked up on one primary point of contention between the two sides of the debate: what is your fair share?

When you distill the debate down to its core contention there are, essentially, two camps: the dollar amounters and the percentagers. For those in the former camp, your "fair share" is more or less defined by the dollar amount on the check you write to the state (or the IRS for that matter). The expectation is that every member of society should pay in a defined amount; after all, a rich person doesn't use the highways or the police appreciably more than a middle class person (there's a debate even there, but just let me play devil's advocate). And while for most members of this camp paying slightly more than the average for higher income people and less than the average for the destitute is negotiable, the "fair share" is still determined by the dollar. When the person you're sparring with over tax policy exasperatingly asks the question of what dollar amount is "enough," you know you've found a member of this camp.

For the second camp, the "percentagers," one's "fair share" is determined by a percent of their income. Under this measure the dollar amount on the check isn't nearly as important as is the level of commitment relative to the individual's means. Indeed, this is why the most recent tax incidence study has been trumped out so many times during this debate. The study indicates that when all taxes are considered the middle class in Minnesota is paying roughly 12.3% of their income to the state while the rich (defined here as making over 400K) pay in only 9.6%. Obviously, those who find themselves in the percentage camp interpret this as an example of the wealthy failing to pay their fair share. When the person you're sparring with over tax policy exasperatingly cites the tradition of progressive tax policy in the state of Minnesota, you know you've found a member of this camp.

I put forth and attempt to define the distinction between these two ideological starting points because I think the lack of recognition of the depths of this difference prevents many honest discussions of tax policy from even getting started. I would postulate that there are more people who find themselves in the "percentager" camp but it's surprising how many are on the other side and the range of circumstances from which they come. Personally, I would assert that it is a moral obligation for those who are better off to give more to the cause; an obligation that dates back to Abraham's tithing in the book of Genesis. And there are also scores of economic theories that support the idea that the wealthier should contribute a correspondingly greater proportion. But, I digress.

Once we accept this difference of position and determine which camp holds the dominate opinion, we can move on to the more practical details such as whether higher income individuals should be made to give above the median rate, or how high the rate need be set. But until then we're going to hit a roadblock every time we get to the line about "your fair share."