Closing Minnesota’s Budget Deficit

Why we should make spending cuts and not raise taxes

Preview:

Closing Minnesota’s Budget Deficit shows that given Minnesota’s elevated levels of state government spending, there is ample scope to meet the forecast budget deficit entirely through spending cuts without threatening key services. The budget for the current biennium that runs from July 1, 2019 to June 30, 2021 is $48.3 billion with a $2.42 billion deficit forecast. If we took this amount out of the amount of projected spending for FY 2021—$24.4 billion9—we would be returning spending in real, inflation adjusted, per capita terms to the level of 2016-2017.

The facts are: Minnesota’s tax rates are already some of the highest in the United States; hikes in tax rates do not appear to drive increases in tax revenues; tax revenues seem to be driven by economic growth; tax hikes have been shown to retard economic growth; and in total and per person, and in real terms, Minnesota’s state government has never spent more money than it is right now. Together, these should steer us toward relying on spending cuts to achieve fiscal consolidation.

A full copy of the report can be viewed here.