Rebate schmebate: It’s starting to feel like 1999
The current budget debate is shaping up much like the debate in 1999, albeit with exponentially more money involved. Jesse Ventura had just shocked the world with his election as governor, largely a result of pent-up frustration from voters who felt government leaders weren’t listening. Gov. Arne Carlson came into office with a budget crisis in 1991 and “solved” it by raising the sales tax. At the end of his term with a strong economy from the tech boom producing budget surpluses, Carlson stubbornly refused to cut taxes. The 1998 election resulted in Ventura winning the governor’s office and House Republicans claiming the majority for the first time since 1986 (and really since party designation in the early ’70s).
During the 1999 session, House Speaker Steve Sviggum engineered a bipartisan 129-1 vote for his tax plan that permanently cut all three rates (this was before Mark Dayton’s fourth tier), with a larger cut coming to the middle class. Sviggum was walking across the street from his office to the State Capitol for a press conference on the state budget while discussing talking points with a young staffer.
“What about a tax rebate?” Sviggum asked.
“Rebates schmebates,” said the staffer.
“What does that even mean?” asked Sviggum.
“You know, rebate schmebate, forget rebates. We need permanent tax cuts,” answered the staffer.
Minutes later at the press conference, the moment was right for Sviggum to deliver that line. Rebate Schmebate became the headline for newspapers across the state the next day.
Sviggum fought hard in 1999 for the largest permanent tax cut in Minnesota history and eventually convinced Gov. Ventura to support cutting all three rates. The two-against-one dynamic was too much for Senate Majority Leader Roger Moe to resist and the tax cuts became law. Of course, Ventura eventually got his rebate checks as well, with the press branding them “Jesse Checks.”
With the surplus reaching $9.25 billion, the frustration of Minnesotans feels the same as it did in 1999. Failure to permanently cut income tax rates now would be an indication that our leaders are not listening, just as they weren’t in the late 1990s.
Senate Republicans recently proposed a massive income tax cut on the bottom rate, moving it from 5.35 to 2.8. With the surplus at $9.25 billion, they should revisit their plan and propose a cut to each of the four rates.
Gov. Walz is playing the role of Arne Carlson by stubbornly refusing to lower rates, instead proposing a rebate of $500 per person and $1000 per couple. This one-time rebate will not address the structural problem of the state collecting way more from taxpayers than needed to fund the budget. Walz also declared that his “One Minnesota” mantra does not include people who are successful, pay taxes, give to charity, start businesses and create jobs. Otherwise known as “the rich.”
“I’m willing to look at their first-tier look, as long as we’re excluding some of the wealthier Minnesotans.”
Remember, the second-tier tax rate kicks in between $28,080 to $41,050 depending on your filing status. Gov. Walz needs to be pressed on his definition of “wealthier Minnesotans” as this debate goes forward.
DFL Speaker of the House Melissa Hortman is furthering the false narrative that the surplus is the result of evil corporate greed and therefore should be redistributed to deserving groups (“deserving” will be decided by House Democrats). As we pointed out here, individual income tax receipts are by far the biggest contributor to the surplus, more than double corporate income tax receipts.
Hortman also raised the idea of a property tax rebate, ignoring the fact that property taxes are collected at the school, county, and city levels. Efforts to use state money to lower local property taxes always backfire as local governments and schools simply raise taxes back to previous levels, resulting in no net gain for taxpayers and more government spending at the local level. Local spending really means more employees and higher salaries for public employee unions such as MAPE, AFSCME, and Education Minnesota, all major donors to House DFLers’ campaign efforts.
Voters in 1998 were tired of huge budget surpluses and politicians preaching caution with their money. They understood that a state surplus was an over-collection and wanted their money back. Leaders today should look to history as they decide what to do with our money. All $9.25 billion of it.