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July 7, 2005
Budget debate
The article I selected was from the Star Tribune. It appears that the state is nearing a budget solution. The article reported that the Republicans and DFL are closer to figures on education funding but still need to crunch numbers on health and human services funding. It seems like one of the main sticking points in the budget is the proposed revenue from a “racino”. Governor Pawlenty wants the House and Senate to vote one two different proposals. One would gain revenue from a 75-cent-per-pack on tobacco and another would raise money from a racino. Republicans want to force a vote on the racino – a source of funding many Minnesotans view as favorably. The State Attorney General as said that the current racino bill violates the State constitution. DFLers are worried that it isn’t a viable option for revenue because of the numerous legal challenges it faces. The Senate has already proposed closing corporate tax loopholes that would generate $187 million. The Governor opposed this and the Senate responded by cutting it $107 million to $80 million. The reason I selected this was shed light on a very prominent local issue that the state is facing. I do not think that the state should count its eggs before they hatch when considering the racino. It seems irresponsible to count on a source of revenue that the state attorney general has said is not constitutional. It is also unfortunate that the Governor would not agree to close corporate tax loopholes that cost the state millions of dollars. How do other people feel about a racino in the state? Is it something that you support?
Comments
Although corporate tax codes need reform, the corporate tax loopholes that everyone talks about are not as big of a problem as many believe. The reason these "loopholes" were created was to encourage businesses to remain in Minnesota. Minnesota coorporations pay one of the highest tax rates in the country and many have relocated to other states or even other countries.
One example of a "loophole" is the ability for coorporations to bring profits made in other countries back to the state at a lower tax rate. This actually increases tax revenue. Much of the profit is made from companies building and selling products in another country, just as Honda builds and sells cars in the US. If they were not able to bring these profits back to Minnesota at a lower tax rate, they would simply not bring them back at all and would reinvest them in another country, and the government gets nothing. The way it works now, the company is able to bring the money back to Minnesota and reinvest it here, and the state recieves tax revenue.
My argument is not that coorporations should not have to pay taxes, or that the tax laws should not open to reform as a source of revenue. However, I believe many people see big coorporations as evel entities that never pay taxes, this is simply not true. We must be careful not to tax coorporations too much or they will leave the state, in which case we loose a lot of tax revenue and jobs. There are currently radio ads from the state of South Dakota encouraging coorporations to move there in order to pay lower taxes.
Posted by: Ryan at July 13, 2005 5:36 PM