Posted at 6:04 AM on June 13, 2012
by Tom Scheck
Filed under: Daily Digest
The economic development fund created by this year's bonding bill leads the digest today. Groups are lining up their proposals to tap the $47.5 million fund.
MPR takes a look at St. Paul's request for a new St. Paul Saints stadium. The city is preparing to finance its portion of the plan with a land swap. $8.5 million in borrowing, $1.5 million in a neighborhood improvement program and $4 million in unspecified funds. The city council is expected to approve the city's request for money from a Department of Employment and Economic Development fund.
Ramsey County will make a plea for the development grant money to redevelop the army ammunition site.
Politics in Minnesota says there's an intense lobbying push for the DEED money.
Minneapolis fire fighter injuries are on the rise.
Anoka County pulls the plug on the proposed commuter rail expansion.
MPR says thousands of doctors have not used the prescription drug monitoring program aimed to combat "drug shopping."
DEED will release Minnesota's job figures for May on Thursday morning.
Twin Cities home prices rise again.
A steep rise in health care costs is expected.
More than 7 in 10 teens are jobless this summer.
Minnesota's business leaders say immigration leads to economic growth.
The World Health Organization rules that diesel fumes cause lung cancer.
Ramsey County Elections Director Joe Mansky says it's possible that he may ask elections officials to provide IDs to people who don't have them if the constitutional amemdment is passed.
The Pi Press says the plan, if approved by voters in November, will cost Ramsey County millions of dollars to administer.
Republican Congressional leaders turn up the heat on Attorney General Eric Holder.
JP Morgan Chase CEO Jamie Dimon called the company's $2 billion loss an anomaly but admitted it was embarrassing.
DFL Sen. Amy Klobuchar wants Congress to act on a highway bill.
DFL Rep. Keith Ellison writes an op-ed that says he wants to get money out of politics.
DFL Rep. Tim Walz pushes wind energy during a stop in Rochester.
Russia is selling helicopters to Syria.
The weapons push has Syria headed to a civil war.
Race for Congress
Roll Call says the NRCC bought $856k in the Minneapolis market to help GOP Rep. Chip Cravaack in November.
A Democrat won a special election in Arizona that replaces Gabrielle Giffords.
Race for President
President Obama tries to reenergize his campaign with an attack on Mitt Romney.
Obama's tough month has some Democrats worried.
Mitt Romney lays out a health care plan that focuses on a "consumer market."
Tim Pawlenty, who is being mentioned as a possible running mate to Mitt Romney, joined the board of a Frac sand miner.
A debate in Washington over a new tax on medical devices has put Minnesota front and center.
The tax, which is part of the new health care law, would affect the state's sizable medical device industry. And the person leading an effort to repeal the tax is 3rd Congressional District Republican Rep. Erik Paulsen.
Paulsen says the tax is simply bad for business.
"Suddenly, our medical-device industry will face one of the highest tax rates of any industry in the world," Paulsen wrote in a June 6, 2012, Star Tribune opinion piece.
It depends how you define tax rates, but there is a case to be made that Paulsen's claim is in the ballpark.
Paulsen is referring to a 2.3 percent tax on most medical device sales embedded in the new health care law. If the tax is allowed to go into effect in 2013, it would create $29 billion in new revenue for the federal government over 10 years - or a rough average of $3 billion every year, according to the congressional Joint Committee on Taxation.
The cash is meant to help pay for the new health care law.
Paulsen's claim that the device industry will face one of highest tax rates in the world comes from a widely circulated report commissioned in 2011 by the device industry.
The report was meant to highlight how the device tax could affect the industry, and predicted that market demand for devices could decline by as much as $6.7 billion annually. (Two separate analyses, one by Bloomberg Government and another by the left-leaning Center for Budget and Policy Priorities, have questioned the accuracy of the industry report.)
In 2006, the medical device industry reported taxable income of $13.7 billion and paid $3.1 billion in corporate taxes, according to the industry report. That's a roughly 23 percent effective tax rate - right around the 25 percent average for all industries, according to a recent study by the Tax Foundation, a D.C.-based think-tank that tends to take a conservative view on taxes.
Add the additional $3 billion burden of the new device tax on top of that, and the industry would pay more like $6 billion in taxes or a roughly 45 percent tax rate - well over the industry-wide average.
The report's authors are making something of an apples-to-oranges comparison. "Effective tax rates" typically refer to corporate taxes - not excise taxes such as the device tax - paid on profits, said William McBride, an economist with the Tax Foundation, though Paulsen doesn't specify "effective tax rate" in his op-ed.
"It's not the standard practice to talk about all sorts of taxes as an effective tax rate because effective tax rates generally refer to corporate taxes on profits as a share of profits," McBride said. "But their point is very legitimate. By being hit by a special excise tax that no other industry pays, they are paying exceptionally high tax rate. Whether they call it an effective tax rate as a share of income or not is a secondary matter."
While it's uncommon for economists to look at all taxes when measuring effective tax rates, McBride added that including industry excise taxes, for instance, does increase the corporate tax rate for all businesses.
Roberton Williams, a senior fellow at the Washington D.C.-based Tax Policy Center, agrees that Paulsen's approach isn't traditional, but is a good way to get an overall idea of what the new tax burden would be on the industry.
"You want to take into account all the taxes you pay" when assessing tax burden, Williams said. "But what they shouldn't say is that this will give them the highest corporate tax in the world."
He also pointed out that the industry will likely be able to pass along the cost of the tax increase to consumers because it's unlikely patient demand for devices, particularly life-saving, devices will decline dramatically. Supporters of the tax say that the health insurance law would mean tens of millions more Americans would have health insurance, and that would increase demand for medical devices.
Paulsen's point that the health care law would greatly increase taxes on the medical device industry is valid.
Some would quibble with how the tax is calculated and exactly how it ranks with other industries. But experts agree medical device companies would face higher taxes - it's just a matter of how much.
It's still unclear exactly how the medical device tax will affect the industry, but because Paulsen's claim is defensible, it leans toward accurate.
The Star Tribune, Device tax, if not stopped, will stifle, by Rep. Erik Paulsen, June 6, 2012
The Tax Foundation, Beyond the Headlines: What Do Corporations Pay in Income Tax?, by William McBride, Sept. 2011
The Tax Foundation, Government Takes a Greater Share than Shareholders, by William McBride, Nov. 2, 2011
Bloomberg Government: Medical Device Industry Overstates Tax Impact, by Christopher Flavelle, Feb. 9, 2012 (subscription only)
Roberton Williams, senior fellow, Tax Policy Center, June 12, 2012
Will McBride, economist, Tax Foundation, June 12, 2012
Matt Caminiti, analyst, Bloomberg Government, June 12, 2012(5 Comments)
Americans for Prosperity Minnesota, the local arm of the conservative Americans for Prosperity, is targeting three state Senate incumbents for supporting the new Vikings stadium.
In an unusual twist, two of those targets are Republicans: Sen. Julie Rosen of Fairmont who is running in SD 23 and Sen. Bill Ingebrigtsen of Alexandria who is running in SD 8. The third, Sen. Terri Bonoff of Minnetonka, is a Democrat running in SD 44.
"We simply don't agree with publicly funded stadiums," said John Cooney who is state director of Minnesota's branch of Americans for Prosperity (AFP).
"A nearly half a billion dollar boondoggle taxpayers can't afford. Senator Bill Ingebrigtsen sided with corporate special interests and his policies are costing taxpayers," an example of the flier reads. It calls the Vikings stadium deal a "give away" to corporate special interests.
The Vikings stadium will cost the state $348 million paid for with new, expanded electronic pull tabs and bingo. The City of Minneapolis will kick in $150 million paid for with existing sales and hospitality taxes.
All three senators were instrumental in writing and passing the Vikings stadium deal.
Bonoff is running against former Republican Sen. David Gaither, and the race is considered competitive by both parties.
The fliers also highlight the senators' other votes, including one against allowing voters to decide on the so-called right-to-work constitutional amendment.
AFP supports small government and low taxes. It was founded by David Koch, a well-known name among conservative donors and co-owner of Koch Industries, a conglomerate that operates oil refineries and owns several household goods brands.
Koch serves as chairman of the organization's tax-exempt educational arm, according to recent tax filings. A separate arm of AFP is allowed to pay for political advertisements, such as the fliers showing up in Minnesota.
The AFP-Minnesota mailers may raise some eyebrows; it's unusual for a right-leaning organization to oppose the records of right-leaning lawmakers.
But Cooney said that political affiliation doesn't always mean much to AFP.
"The votes that they took certainly weren't conservative in nature," he said. "We believe that you don't just fight for conservative issues, but you hold our public representatives accountable for the votes they take."
AFP has chapters in more than 30 states, including Minnesota, but the group here has kept a relatively low profile since it opened up shop in 2011. It weighed in on the right-to-work debate, it hosted a rally for tax cuts featuring former GOP contender Herman Cain, and it commissioned a poll about the Vikings stadium.
Cooney estimates that the group has roughly 17,000 members. And its funding currently comes from donors in the state.
Cooney isn't sure which legislative races or which issues AFP-MN will be weighing in on next, but added that the group will be focusing on the legislative performance of any number of state lawmakers.
"Our hope is that we won't be seeing bills like [the Vikings stadium bill] come up again in the near future" he said. "We want to be part of the dialogue in the state on how we spend our taxpayer dollars."