60 thoughts on “PR Pro Horner Defies PR Conventional Wisdom With Budget Plan

    1. Joe Loveland says:

      I honestly think Horner put PR considerations aside and advocated for what he believes is best for the state. You may disagree with what he advocates — I do in part as well — but I don’t think yesterday’s was driven by PR considerations. What Horner laid out is a very tough sell with voters, and I think he knows it.

      Still concerned about Horner not being specific about his budget shortfall plan?

      1. BTW – of a $6 billion shortfall, $2.45 billion is about 40 percent. Forty percent in UNSPECIFIED cuts. As Eric Black writes, contra your analysis, this is more of a political document than a budget one.

      2. Joe Loveland says:

        Everything is relative. Emmer is non-specific on 100% of his cuts/redesigns. Dayton is non-specific with 100% of his income tax shift (i.e. doesn’t say how much the increase would be for various income levels).

        To be fair, even candidates who want to be more specific, and I think both Dayton and Emmer fall into that category, find it difficult to do so without a staff of state government number crunchers and modelers at their disposal. That is a big part of the reason why Black is correct, proposals during campaigns are never budget documents akin to what Governors can produce post-election.

  1. John Gaterud says:

    Clothing sales tax = attack on middle- and lower-income classes, the sloganeering will go. Any further nuance in Mr. Horner’s plan will be lost, regardless of what we/you/I might think of any particular merit(s). Lack of specifics (“I have no budget staff”) depresses—not enhances—credibility. Rube Goldberg about right, Joe. In this case, object never reaches end of maze; it just keeps falling onto floor in different places. Voters may display little interest in watching tinkerer try to run (or fix) contraption, whatever its imaginative civic rendering (kinda like watching a teacher [or PR presenter] try to operate unfamiliar piece of AV equipment: “Um, uh, I’ll get it…oh, shoot, just a, uh, minute….” Finally, first bullet flickers upon screen—in this case: sales tax on clothing! Strikes 1, 2, 3 [to mix all metaphors]). Sorry. Crowd is restless. Next.

    1. Joe Loveland says:

      Yep, the Strib’s headline, front page and above-the-fold is “Horner’s Budget Would Tax Clothes.”

      Many swing voters choked on their Cheerios when they read that this morning, and many didn’t read much or any further.

  2. Newt says:

    What evidence is there that $17 BILLION/year is insufficient to run state government?

    Someone, anyone please elucidate.

  3. Minnesotan says:

    I don’t know, I would consider myself a swing voter (or an idiot as Rob so eloquently puts it) and I think many of us realize candidates can’t just tell us everything will be fine. There will have to be some tough and unpopular decisions made – no way around it.

    Bigger question. In my lifetime there has never been a tax on clothes in MN. Yet other states do tax clothing. .

    Don’t get me wrong, I’d prefer not to pay sales tax on clothing than to pay it. But what is the state’s reasoning for not charging a sales tax on clothing while other states do?

    1. Minnesotan says:

      I realize that. But they *have* to wear clothes and eat in Wisconsin too, and they tax clothing.

      If my feet were held to the fire I would be against a tax on clothing. It’s one of the necessities of life. But it’s not a radical idea to tax clothing, as other states do it and are still on the map.

      1. True, other states do it. It’s really not such a big deal. I think Horner’s proposal is pernicious, by the way, the same way his proposed tax on tobacco and alcohol are: It goes down the same old road of citizens getting other people to pay the costs of their own government. If we want roads, schools, health care, etc., we should pay for it – not look for unpopular groups to stick it to.

      2. Joe Loveland says:

        It’s worth noting that the tobacco tax is about the most effective way there is to reduce smoking rates, and subsequently reduce the death and suffering from tobacco related illnesses. Research shows that every 10 percent increase in the price of cigarettes reduces youth smoking by about seven percent and overall cigarette consumption by about four percent.

        The smoker who quits smoking because of the increased tobacco tax, and consequently avoids tobacco-related suffering and death, is the ultimate beneficiary of the tobacco tax, not a victim of it.

      3. Joe Loveland says:

        Almost all medical and public health actions are effective for some people, but not all people. Does the lack of universal effectiveness rule out use?

        True, this policy is effective for some people — the research says it is the most effective policy tool we have, including for addicted people — but not for all people. Should you really rule out the use of any public health tool that isn’t 100% effective?

        The point is, yesterday Horner cited a public health reason for enacting this tax. So, it’s not fair to say he has chosen this tool simply because he wants to punish smokers. There is no reason to believe that is his motivation.

      4. Oh please. These policy proposals are to target out groups – those least likely to complain, or to gain any sympathy from voters. It is a cop-out to ask others to pay for our government.

      5. Joe Loveland says:

        Rob, if Horner’s prime motivation was to, as you say, “target out groups – those least likely to complain,” why in the world would he propose to tax clothes, which 100% of Minnesotans wear. Your logic doesn’t hold up.

        Horner’s overall approach is much more Chamber of Commercey than I support, but your criticism of his motives isn’t fair. You can disagree with the guy without portraying him as having cruel motives.

      6. Minnesotan says:

        It seems like the we’ve gone to the “sin tax” well enough.

        As others have argued in the past, why then just stop at tobacco and booze? Why isn’t fast food taxed like crazy too. Why aren’t people with speeding tickets and other moving violations forced to pay higher Tabs and registration fees? We could create a long laundry list of society’s ills that we could tax the heck out of.

        Even most smokers will agree it’s a bad habit, but they get kicked in the wallet every time we need more money.

        Let’s just outlaw smoking if it’s that’s dangerous to society.

      7. That doesn’t seem serious to me, Joe. This is a *budget* document – not a health care document. Would he be proposing this if there was a surplus and not a deficit?

      8. Joe Loveland says:

        WCCO-TV reported:

        As governor, Horner said he’d expand Minnesota’s sales tax while cutting others, including the corporate income tax. He mentioned his role in helping craft a 75 cents-per-pack fee on cigarettes in 2005 and said he would like to raise tobacco taxes even more.

        There was a much smaller shortfall in 2005, but Horner was working with a coalition of public health groups working to reduce the smoking rates not groups working to close the budget deficit. Full disclosure: I’ve worked with public health groups on tobacco control issues for years.

      9. Minnesotan says:

        Hi Joe – hopefully you can educate me then. Do you know if the tobacco taxes/fees go directly to cover health care costs? Or do they go to everything else under the sun like education, social services, etc?

        I honestly don’t know.

      10. Joe Loveland says:

        Minnesotan, I’m not sure about this, so don’t rely on me too much, but I believe the money raised by what Pawlenty dubbed a “health impact fee” went into the general fund, which funds just about everything, including medical care, public health, and many other non-related services. I don’t believethe proceeds were earmarked specifically for medical care and public health.

        To me the reason to do a tobacco tax is not to raise money. It is to increase the price of cigarettes to incent quitting and prevent kids from starting. That’s what the research shows raising the tobacco tax does, and that’s why public health organizations like the Centers for Disease Control, American Cancer Society, American Heart Association, American Medical Association and others that could care less about revenue-raising strongly support it.

  4. BTW – Minnesotan, are you one of those *idiots* who voted for Norm Coleman over Walter Mondale because you thought Mondale was mean to Coleman in a debate?

    1. Minnesotan says:

      Nope. Although I can understand why people were turned off with the way Wellstone’s memorial became a DFL Pep Rally.

  5. Newt says:

    Joe: “As such, Horner’s plan inflects pain on just about everyone…”

    First, that’s not a winning position.

    Second, the truth is that it inflicts pain on the private-sector productive class and spares pain on the bureaucratic welfare state.

    And is it really the government’s job to inflict pain on anyone?

    New flash: Government’s only legitimate role is to preserve individual liberties.

      1. Newt says:

        or if I consume too much sodium, fail to wear sunscreen, use the wrong lightbulb, wear flammable pajamas, paint my house an unacceptable color, burn a log in my backyard, wear a seatbelt, smoke a cigar …

  6. Great conversation, some on target, some of it pressing writers’ own points (and no argument with that). But keep in mind that liberal groups (Growth and Justice), conservative groups (the tax commission appointed by Gov. Pawlenty) and those in-between all have recommended an expansion of the sales tax (especially with the protections I included) because it is fair, raises revenue in a predictable way and allows for the kind of tax reform that is needed to strengthen economic growth. But here’s the real point — I’m willing to put specifics on the table because it’s not enough for someone to just win an election in November. That person has to be able to govern. That only can happen if candidates are willing to engage Minnesotans in honest conversations about the seriousness of the challenges, the opportunities we have and the solutions that are possible.

    1. I want to thank Tom for choosing to post more specifics, and Joe for choosing to cover it in this posting. This is exactly what I felt was missing from the prior postings about candidate ads.

      This is exactly the information I need to make my vote count and I give extra-credit to Tom simply for being brave/smart enough to provide more specifics and treating me like the adult I wish to be in this election. THANKS!

      1. Not sure where you or Rep. Emmer get this soundbite, but it’s not supported by facts. The 2009 Budget Trends Commission, co-chaired by the conservative former legislator and Human Services commissioner Kevin Goodno said this among its findings that Minnesota has a long-term structural shortfall:

        “- Demographic and economic factors will lead to lower growth of state tax revenues over the next 25
        years.
        – Minnesota has a long-term structural budget problem, with long term expenditure growth likely to
        outpace revenue growth.”

        Facts are stubborn. Minnesota does need to tighten spending, as I’ve proposed, but spending cuts alone will never dig Minnesota out of the hole created by Democrats and Republicans.

  7. Tom Horner’s war on the poor. Look at this post from MPR on the tax incidence of the Horner proposals, taxes on tobacco, liquor, and who loses money gambling. Guess what? They ALL hit the poor the hardest.

    You might be an anti-tobacco crusader, Joe, but you and Horner’s positions make you class warriors for the rich. Maybe you intended that. As a lifelong Republican, I’m betting Horner did.

    http://minnesota.publicradio.org/collections/special/columns/news_cut/archive/2010/08/should_sin_taxes_be_raised_in.shtml

    1. Joe Loveland says:

      Rob, it’s a good piece and you make a valid point. It’s why I wrote of Horner’s overall package “I personally would like to see more of the burden shared by wealthier Minnesotans.” If you raise a regressive tax for public health reasons, you can neutralize the effect by reducing another regressive tax. And I do support making the income tax more progressive.

      1. That’s not what Horner is proposing. In fact, he wants to LOWER the corporate rate. It is no coincidence who his plan hurts. It’s who he is.

  8. As noted by groups as diverse as the business tax reform commission appointed by Gov. Pawlenty (who then ignored its proposals) and Growth and Justice, a sales tax is not inherently regressive. In fact, a clothing tax tends to be progressive — the wealthy buy more and buy more expensive clothes. Reducing the overall rates provides a discount for families starting out when the major purchases are furniture and appliances. And, I exempt food and necessary services. In addition, I have money in the budget specifically to provide a safeguard against the regressivity. So why a sales tax? It doesn’t hurt Minnesota’s competitiveness as 30-40% income tax increase does; it puts Minnesota in line with most other states; and, it provides the revenue fairly to reform other taxes. I also include $200 million in revenue from tax expenditures — these breaks, deductions, etc., overwhelmingly benefit the wealthy. Consequently, most of what I propose would come from wealthier Minnesotans but without raising the tax rate to among the nation’s highest; without the loopholes that would allow many wealthy to avoid Sen. Dayton’s tax; and, without taxing small businesses (yes, I know, Dayton claims that his tax only affects 8% of small businesses — but those 8% have more than 90% of the small business jobs). And Mr. Emmer? Who knows?

    1. Funny that you don’t mention the tax incidence of alcohol, tobacco, and gambling, also parts of your plan. Nor do you mention your plan to lower corporate taxes, which help you know who. It is also dubious – bordering on dishonest – to say hiking taxes on the rich hurts competitiveness.

      1. Hiking taxes on business hurts competitiveness, and that’s the impact of Dayton’s plan. Most small businesses pay taxes at the individual income tax rate. By Dayton’s own calculations, businesses with 90 percent of small business jobs in MN would be affected by his rate increase of 30 to 40 percent. On tobacco, I’ve been clear all along — this is health policy and revenue. There is no good public policy that supports cheap cigarettes. Gambling and alcohol are discretionary. If you don’t want to pay the tax, don’t participate in the activities.

      2. “Hiking taxes on business hurts competitiveness”

        Who is planning on hiking taxes on business? Taxing individuals and households is NOT the same as taxing businesses. How does it hurt a business? This is a complete fallacy. So what if small businesses pay taxes at individual rates? They only pay taxes on profits. Taxing the owners is no way hurts the business.

        And where does Dayton say that “businesses with 90 percent of small business jobs in MN could be affected” ?? The owners might be affected, but not the businesses.

        Funny that a rich guy like yourself would propose to increase taxes on poor people who like to smoke and drink, and tell them if they don’t like it, too bad, don’t do it.

  9. That’s not how taxes on Sub S and LLCs work, Rob. First, all the income drops to the bottom line; what’s left after expenses is distributed to the owners and taxed at their individual income tax rates. That is true even if the owner(s) decide they need to retain some earnings for investments, to create new jobs or for any other purpose. The retained earnings are taxed at the indiviudal income tax rates and the owners are liable, even if they don’t take the money. Dayton repeatedly has said that his tax proposal would affect only 8 percent of small businesses. But his data also show that those 8 percent account for more than 90 percent of the small business jobs in Minnesota. And, finally, in a Sub S or LLC, there is little distinction between the business and the owner(s) for tax purposes. The owner is liable for the taxes, not the business.

    1. PM says:

      And, in case Tom did not make this additional point clear (or assumed that we all would know this) the vast majority of small businesses are either a SubChapter S or an LLC.

      1. Joe Loveland says:

        Okay, so Mr. Horner is advocating an increase in some regressive taxes — alcohol and tobacco. I think he has good public health motives for those policy recommendations, but there is a regressive effect.

        So, Mr. Horner, if you can’t touch the income tax because of concerns about impacts on small businesses, then how can you offset those regressive tax increases to at least keep the overall code neutral, or, what I’d advocate, make the overall code more progressive?

    2. Yes – “what’s left after expenses” is taxed – that’s called profit! If they reinvest their profits, then they can expense it as a writeoff. “Retained earnings” are profits, duh! If eight percent of “small businesses” account for 90 percent of jobs they are hardly typical.

      As I wrote before, asserting that a tax on the wealthy is a tax on small business is a canard bordering on dishonesty.

      1. If a Sub S or LLC — a typical small business — is sitting on cash, the owner has paid taxes on that cash at the individual income tax rates. That’s my point. A “C” corporation has a different structure. Retained earnings are not profits, and a depreciation schedule is not the same as a “write-off,” at least in the way you frame it. And herein rests the politics of “tax the wealthy.” When most people, including, it seems, Sen. Dayton, don’t understand the difference between taxing wealth and taxing income and the difference between taxing a successful business or a successful person, it may lead to good politics, but it’s bad economic policy — at least for those who want to see Minnesota grow and create jobs.

  10. BTW- if you don’t like the structure of corporate tax law – specifically the part about retained earnings – why don’t you make those part of your campaign? Corporations might have to pay taxes on retained earnings, but once they put them to work – by investing in the business as you say – they are deductible expenses.

  11. Mike Kennedy says:

    Yes, a business owner like me can reinvest my profits in the business and get business deductions.

    For example, small businesses can expense equipment up to $250,000 without having to depreciate it out over longer schedules. This administration wants to cut this back to $25,000. Larger businesses can expense half of their equipment purchases. This administration wants to cut that out entirely so that all must be depreciated.

    So the incentives to reinvest — especially in capital investments — will be reduced at a time when tax rates will be increased.

    Is it any wonder that businesses are sitting on cash and no investing it? As for smaller businesses, we will simply not make capital purchases and cut payrolls and other expenses to keep our bottom line profits where they are after accounting for the tax increases.

    No to slow growth policies will only hurt — economically and politically.

    1. Exactly – small businesses are sitting on cash! How will giving them MORE money help? They’ll just sit on it. Time for some real Keynesian economics – put money in the hands of people who will spend it. Dayton’s plan is just right – tax those high income people more – essentially stopping them from sitting on that money, as you say – and spend it on government programs that put money into peoples’ hands.

  12. Mike Kennedy says:

    Well, in theory it sounds good. Unfortunately, if business doesn’t spend, consumers aren’t going to — we are seeing that right now.

    The government can create all the money it wants. What it can’t do is get people or businesses to spend or invest it.

    Right now, neither has much confidence in this economy or government.

  13. Mike Kennedy says:

    BTW:

    There really isn’t any good gauge for how much cash SMALL business is sitting on. What we do know is that large corporations are holding huge amounts of cash and will not part with it until it regains confidence in the government.

    1. PM says:

      Mike:

      i really do n ot think that it is confidence in the government that is the problem–it is confidence in the economy. And those are very different things. The impact of government on business decisions is really rather small, and only on the peripheries. a few percentage point differences in tax rates is not a critical issue, compared to a few percentage point differences in GNP growth rate. And a few percentage points difference in tax rates will not have a significant impact on GNP growth.
      Of course, what we Do focus on is the tax rate issue, because it is something that we can control with precision, directly. We simply can’t do that with GNP.

      1. Mike Kennedy says:

        PM:
        PM:

        I agree. Businesses are more concerned about the economy than the government, but business owners also don’t want the government attempting to over control the economy by applying too much in way of taxing authority or regulatory control.

        In this way, I think operating a government is like flying an airplane. Go easy on the controls and control pressure and the plane will do most of the flying itself. Provide too much control or control pressure, and the the plane will fight you and won’t be as efficient and you will have much more difficulty with it.

      2. Yeah right Mike. “Go easy on the controls and control pressure and the plane will do most of the flying itself.” In what world is that? In this world, going easy on the controls results in 500 million recalled eggs, e-coli in the meat, dead coal miners, exploded drilling rigs that destroy an ecosystem for decades, financial systems that implode, etc.

      3. Mike Kennedy says:

        Oh, and government control and rules and regulations have solved everything — haven’t they? History has shown that the more government controls things, the more shortages; the less growth society has economically and the worse off people are — and that’s what you want more of?

        Anyone who look toward government to save them from the dangers of the world are setting themselves up for disappointment. The government that governs best is the one that governs least.

  14. Joe — I do tax the wealthy. First, I’ve set aside $350 million in my plan — and it’s all on my web site — to guard against the regressivity of a sales tax. A well-designed sales tax expansion is why progressive organizations lie Growth and Justice and business-led groups like the Governor’s Tax Reform Commission have joined in supporting the kind of approach I am advocating. My plan does, in fact, tax the wealthy whether they live in Minnesota 12 months a year or 5 months and 29 days. Second, when you look at my complete plan, you will see that I am generating new revenue from tax expenditures — these are the deductions that go disproportionately to the wealthy.

    1. How does your plan tax the wealthy? I don’t see it in your plan. Seriously. What does it mean when you say, “I am generating new revenue from tax expenditures” ?? Where are the SPECIFICS on the sales tax changes and the changes in allowed deductions?

    2. Joe Loveland says:

      I acknowledge some progressive components:

      – the $350 million sales tax offset for non-wealthy
      – $200 million from eliminating tax expenditures/loopholes (that presumably disproportionately favor the weatlhy, though we don’t know until the loopholes are named)
      – property tax reform to restore equity ($125 million)

      But with the corporate tax elimination($xxx million???) , r&d credit ($75 million) , liquor and tobacco tax increase ($600 million), government-run gambling ($250 million), I do have questions about the overall progressivity of the package.

      I do appreciate that Horner’s numbers do add up to something like the $6 billion shortfall. Hard to do, and he took a serious and thoughtful run at it. I get embarassed for Emmer every time I hear him say that he can fill a $6 billion shortfall by merely merging some agencies.

  15. Also have Growth & Justice and the governor’s tax reform commission actually supported YOUR plan, or are you extrapolating and inferring their support? If so – that is quite dishonest.

  16. Newt says:

    All of you know that the $6 billion shortfall is merely a projection based on anticipated revenues against anticipated GROWTH in expenditures.

    If the legislature decided not to automatically grow government during a recession/depression, 90% of the problem would be solved.

    P.S. Did you know that the poor pay a disproportionate amount of their income for bubble gum, a loaf of bread, a gallon of milk and taxes? It’s because they’re poor.

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