ECM Editorial Contributor
State Revenue Commissioner Myron Frans recently shared some eye-opening statistics with the Metropolitan Council.
The one that strikes in the gut is that in 2010, of the $27 billion the state collected in tax revenues, only $16 billion remained, after “hidden spending,” more commonly known as loopholes, was deducted.
That hidden spending includes tax credits and exemptions deeply embedded in the tax code.
Frans said these exemptions, their amounts and when they were approved by both parties over the years can be found online at http://www.revenue.state.mn.us/taxreform/Pages/-Reform.aspx and clicking on the tax expenditure budget.
Here are some examples of these exemptions.
• $41,571,000 for deductions on employee pension plans, allowing pensioners to deduct the pension from income and pay taxes only when they spend the pension.
• $341,000,000 deduction of homeowner’s mortgage interest.
• $851,500,000 deductions on medical insurance premiums paid by employers.
• $103,500,000 capital gains on home sales.
• $212,600,000 cafeteria health insurance plans.
• $38,000,000 veterans benefits.
Frans has been traveling the state and talking to groups about these numbers and the need to revise the tax code. He plans to release his revision later and won’t tell what he has in mind.
You get some clue, however, when he’s asked what people around the state are telling him. There is broad-based concern about paying higher property taxes, particularly by those on fixed incomes, he says.
He is finding a groundswell of opinion for a simpler taxing system in all forms of sales, property and income taxes.
There are two sides in the tax debate: some want less spending, while others want everyone to pay their fair share, meaning those with more should pay more.
Whatever is the final outcome, Frans said, it must be balanced – something that works all together.
It’s obvious from the amounts of exemptions, that everyone is going to have to share the pain of having meaningful tax reform.
This discussion should be part of the state legislative political campaign process going on now and it should not be delayed until after the election.
— Don Heinzman is a columnist and editorial writer for ECM Publishers, Inc.