In a recent gubernatorial debate in Winona, Tom Horner and Mark Dayton traded barbs over taxes.
Horner, the Independence Party's candidate, said Dayton's plan to raise taxes on the wealthiest Minnesotans would hurt small businesses.
"What Senator Dayton is proposing is not just a tax on success, it is a tax on job creators," he said on Aug. 19. "When we have most small businesses in Minnesota paying taxes at the individual income tax rate, we're now robbing their ability to make investments to retain some of their earnings and make investments in new jobs, new equipment, new technologies."
It's a claim that's often made about Dayton's tax proposal, and it falls into a gray area.
Defining small businesses is a sticky wicket, but for this investigation, there are two definitions that matter.
The federal Small Business Administration identifies them as operations with less than 500 employees, and counts roughly 500,000 such businesses in Minnesota. These businesses can include farms, sole proprietorships or partnerships, and about 90 percent of them report income through the individual tax return.
So, by this standard, it is correct to say most small businesses in Minnesota pay taxes at the individual income tax rate.
But this definition can be misleading because some very large corporations pay their taxes though individual tax returns and some very small organizations don't. So, to dissect Horner's larger point that Dayton's tax plan would put small businesses in a bind, it's best to look at how many people report what's known in the tax world as "flow-through income," or money that comes from business, on their individual tax returns.
By this definition, the Minnesota Department of Revenue estimates that only 8.7 percent of small businesses would be subject to the new tax rate.
If all this sounds familiar, that's because it is. During the 2010 legislative session, lawmakers debated a tax increase on couples making more than $200,000. Opponents argued that many of Minnesota's wealthiest derive some income from small business operations. They also pointed out that firms affected by the new taxes account for much of the small business income in Minnesota.
The same holds under Dayton's proposal. According to the revenue department, while only a sliver of all Minnesotans reporting flow-through income would be affected by the new tax brackets, those filers account for 64 percent of all such income.
Horner is correct to say that most small businesses report taxes under the individual tax return. But it's misleading to imply that Dayton's plan would hit a lot of small businesses in Minnesota. In fact, only 8.7 percent would be subject to the proposed increase. Nevertheless, that narrow slice of filers does account for a lot of the state's small business income.
This claim is inconclusive.
The UpTake, Coalition of Greater Minnesota Cities debate, Aug. 19, 2010
Minnesota Public Radio News, Tax increase would affect 7 percent of small business owners, by Mark Zdechlick, May 13, 2010
The Small Business Administration, Small Business Profile: Minnesota, accessed Aug. 24, 2010
MinnesotaBudgetBites.org, Legislature's tax plan would impact few small business owners, accessed Aug. 24, 2010
Mark Dayton for Governor, Mark's Deficit Solution, accessed Aug. 24, 2010
The Minnesota Department of Revenue, Taxes Paid by Small Business in Minnesota, accessed Aug. 24, 2010
Interview, Tom Hesse, vice president for government affairs, Minnesota Chamber of Commerce, Aug. 24, 2010
Posted at 11:01 AM on August 26, 2010
by Tom Scheck
Filed under: U.S. Senate
MPR's Midday will feature DFL Sen. Al Franken today at noon. The broadcast will be from the MN State Fair. Listen to it on the radio or watch the webcam of the broadcast here.
DFL Tarryl Clark, running for the Congressional seat in the sixth district, is trying to counter an ad released by republican incumbent Rep. Michele Bachmann a few days ago.
Bachmann's ad featured a character named "Jim the election guy." Clark has posted a video on her website starring three men named Jim. They introduce themselves as "actual voters" in the sixth district.
The three Jims dispute the claims made in Bachmann's ad about Clark's support of bills that would raise taxes. The three Jims say Clark voted to hold down taxes for 95 percent of Minnesotans.
Clark's Jims also question what Bachmann knows about balancing budgets, alleging that she uses taxpayer money to promote herself.
Clark's using the video to try to raise money in her campaign.
Meanwhile, Bachmann's trying to meet her goal of raising $48,000 in 48 hours.
An email to supporters says she has to raise $31,533 by midnight tonight to meet the goal.
The three candidates for governor debated compensation for public sector employees today at a debate in Golden Valley. Independence Party candidate Tom Horner also worked to suggest that his DFL and Republican opponents are shifting positions.
When asked for ways to solve projected deficit in the state's public pensions, Republican Tom Emmer said he thought the state needed to shift state employees to a 401k style retirement package. He also complained that public employees are making too much than their counterparts in the private sector.
"This is where the imbalance comes in. Not only do our public employees make on average thirty to forty percent more than private sector employees in the same positions but then they have health care insurance that's gold plated health care while people in the private sector are lucky to keep theirs..."
Emmer was citing studies by two conservative groups and the Bureau of Labor Statistics. Democrat Mark Dayton said he didn't think it was fair for Emmer to denigrate public employees.
"People who work their entire careers in the public sector don't make a lot of money in total and they don't have a lot of retirement income but they have secure income. They bargain for those retirement benefits as they bargain for their health insurance and the school districts in this state buy their insurance in the private market."
Independence Party candidate Tom Horner said he would work to fix the state's public pension system through benefit cuts, higher employee contributions and more public money. He also said Democrat Mark Dayton has repeatedly criticized him for extending the state's sales tax to some services but pushed to extend the sales tax to legal services when he ran for governor in 1998. He also criticized Republican Tom Emmer for repeatedly voting no on bonding bills during his six years in the Legislature but now telling voters he supports a bonding bill.
"I'm impressed that it took Senator Dayton a decade to change some of his core positions. Representative Emmer seems to do it from debate to debate and that's not what Minnesota needs. We need a clear vision. We need a clear focus on where we are going."
Dayton said he is older and wiser than he was in 1998. Emmer said he opposed the bonding bills during his time in the Legislature because it didn't include the right priorities.
You can listen to the entire debate, sponsored by the TwinWest Chamber of Commerce, here: Listen
Governor Pawlenty appointed Major General Richard Nash to be the 30th Adjustant General of the Minnesota National Guard. Nash will success Major General Larry Shellito, who will leave his post on October 31st. Nash currently commenta 34th Infantry "Red Bull" Division, which served in Iraq. He praised Shellito for making the Minnesota National Guard one of the finest in the nation and said his biggest challenge will be the prospects of state and federal budget cuts...
"There will be challenges with restrained budgets as we go forward but certainly my vision is that we'll maintain a ready force here in Minnesota to respond to and react to any homeland defense/homeland security community events and still have a ready force prepared for any national service."
The Adjutant General is the administrative head of the Minnesota Department of Military Affrairs and leads the Minnesota National Guard. Minnesota has the nation's fifth largest National Guard, with more than 14,000 members. Roughly 2,700 Minnesota National Guard soldiers will deploy for operations throughout Kuwait and Iraq in 2011.
Minnesota's Future, a group headed by several conservatives, is scheduled to start running TV ads tonight. The Independent Expenditure group is headed by GOP political consultant Chris Tiedeman and FLS Connect's Jeff Larson. Both Tiedeman and Larson declined to talk specifics on the ad but a source with knowledge of the media buy said $686,490 worth of ads will run on TV stations in the Twin Cities, Mankato and Rochester. The ads will start running today through September 9th. (See update below).
Larson, a close confidante to former GOP Sen. Norm Coleman, confirmed the ads will start running this week but declined to offer any more detail.
"I don't have to much to say on it. The ads are going up today and we'll see them later tonight but I'm not going to preview them or really talk about them until they air."
Larson told the Associated Press last week that the group would help "pro-business" candidates.
It isn't certain who is funding Minnesota's Future. The group filed a campaign finance report on July 20th that said it had $820.45 in the bank. That means the group received most of the money for the ads after the August 10th primary. The next reporting deadline for committees to file a campaign finance report is September 21st.
Tiedeman called me back to say that the ad will focus on Democrat Mark Dayton's tax and spending record. He also said the ad buy will not be $700,000 but a little more than half of that ($350k).
Update: Here's the ad:
Here's a little analysis:
The ad summarizes Dayton's plan to increase income taxes but fails to mention that it would only hit Minnesota's top earners (for singles an after tax income of $130,000, for couples an after tax income of $150,000). The ad cites this MPR story saying Dayton wants to raise taxes $5 million, which he said.
The ad is a bit misleading by saying Dayton wants to increase property taxes and the so-called e-mail tax.
Dayton has been proposing a higher income tax on Minnesota's top earners because he complained that additional cuts to Local Government Aid would force higher property taxes. Dayton has proposed increasing property taxes on homes that cost more than $1 million.
As far as the e-mail tax, the ad is citing this PC World that says Dayton advanced an e-mail tax as a way to tackle spam. What the ad doesn't mention is that Dayton advanced that proposal in Congress. What is misleading about is the ad suggests Dayton would tax e-mail as a part of his budget balancing plan. That is not included in his budget plan.
Update: Dayton's Deputy Campaign Manager Katie Tinucci issued this statement about the ad:
"This is just lies, lies and more lies from people who won't identify themselves. Mark has made it absolutely clear that his plan to close Minnesota's budget hole and to invest in education will raise taxes only on the richest Minnesotans. This attack is especially ironic since it's Mark's plan that will prevent property tax increases. And Mark promised in 2003 to vote against any email tax in the U.S. Senate and has never suggested it in this campaign. Mark is determined to put an end to the middle class carrying the tax burden in Minnesota--it's time everyone paid their fair share."
The clothing, unveiled today at the State Fair, comes in response to Dayton's recent complaint that GOP trackers were trying to intimidate him and his supporters. He also suggested partisan trackers wear some kind of identification.
The Republican shirts include identification along with critical messages aimed at Dayton.
A spokeswoman for Dayton declined to comment specifically on the shirts, but she suggested the GOP spend more time trying to explain candidate Tom Emmer's plan for reducing the deficit.
During a debate in Golden Valley, Tom Emmer put public sector employee salaries in his cross-hairs.
"On average, a person who works in the private sector in a job similar to that of somebody who's working in the [public] sector is making on average 30 to 40 less," the Republican gubernatorial candidate said on Aug. 26, 2010.
When it comes to national averages, he's correct. But a closer look at these numbers tells a different story.
Emmer's office clarified that he's talking about total employee compensation, not just salaries. He also is speaking of state and local employees, not federal workers. When overall compensation, including benefits, is taken into account, private sector employees make about $27.73 an hour while public sector employees make about $39.81 an hour, according to the most recent statistics from the Bureau of Labor Statistics. So overall, public sector employees make about 43.6 percent more in total compensation.
However, these numbers can be misleading because they include wages and how much it costs employers to provide benefits. For instance, a public sector worker is paid an average of $26.25 an hour. On top of that, it costs the government an additional $13.56 on average to cover health care, paid leave and other benefits -- for a total of $39.81 per worker.
So, it's useful to look only at hourly wages and salary. On average, private sector employees made $19.58 an hour. Meanwhile, public sector employees made $26.25 - about 33 percent more than private sector workers.
Emmer's essentially on the mark when it comes to national averages for public and private sector employment. Still, his statement is misleading for several reasons.
First, he implies that, job for job, public sector workers make 30 to 40 percent more than private sector employees. That's not necessarily true. For instance, the average state government computer programmer makes $29.70 an hour while the average computer programmer working at a private firm makes an average of $36.40 an hour. And a lawyer working for government makes, on average, 26 percent less than a lawyer working at a private firm, according to the Federal Salary Council.
In fact, the Bureau of Labor Statistics stresses that it's dangerous to compare public sector average pay to private sector average pay because the government work force is more skilled than the private sector work force, so average hourly pay is naturally lower.
When it comes to national averages, Emmer's correct that public sector employees make 30 to 40 percent more than their private sector counterparts. But his claim is misleading because he implies that this rule works for job-to-job comparisons; in fact, there are plenty of private sector jobs that pay more than public sector jobs. His claim is inconclusive.
Bureau of Labor Statistics, Employer Costs for Employee Compensation - March 2010, accessed Aug. 26, 2010
Bureau of Labor Statistics, May 2009 National Occupational Employment and Wage Estimates by ownership: State government, including schools and hospitals, accessed Aug. 26, 2010
Bureau of Labor Statistics, May 2009 National Occupational Employment and Wage Estimates by ownership: Cross-industry, private ownership only, accessed Aug. 26, 2010
Office of the Legislature Auditor, State of Minnesota: State Employee Compensation, Feb. 3, 2000, accessed Aug. 26, 2010
The Federal Salary Council, Memo: Level of Comparability Payments for January 2011 and Other Matters Pertaining to the Locality Pay Program, accessed Aug. 26, 2010
The Cato Institute, Employee Compensation in State and Local Governments, by Chris Edwards, Jan. 2010
The Heritage Foundation, Inflated Federal Pay: How Americans Are Overtaxed to Overpay the Civil Service, by James Shek, July 16, 2010
Interview, Carl Kuhl, Emmer for Governor, Aug. 26, 2010
Interview, Jim Nobles, Legislative Auditor, State of Minnesota, Aug. 26, 2010