One thing that came through loud and clear from Gov. Dayton's visit to Duluth is that they love the thought of tax increases on others. Another thing that came through loud and clear is that they love the spending increases to be lavished on them:
Duluth is friendly territory for Democrats, and Dayton throughout his political career has built strong ties to northern Minnesota’s politically influential labor unions. Many in the crowd wore shirts and buttons showing their union allegiance, and applauded when the governor said schools need more money, the minimum wage should be higher and particularly that the rich should pay more taxes.
“I don’t want to raise taxes on middle income Minnesotans,” Dayton said, saying that’s how critics have tried to portray his proposals. “You pay a higher percentage of your taxes than the wealthier people in the state, which is why I think they’re more than capable of paying their fair share. My proposal is to raise taxes 2 percent on the wealthiest 2 percent of the state. It’s just on the wealthiest 2 percent.”
Gov. Dayton didn't tell the truth when he said his proposal only increased taxes "on the wealthiest 2 percent of the state." Apparently, that didn't matter to the audience there because they aren't the wealthiest 2 percent.
Gov. Dayton is right that his income tax increase is only for the wealthiest 2 percent. That isn't the whole truth, though. Sen. Bakk said Wednesday that Gov. Dayton's cigarette tax increase will be part of the final budget. That's a regressive tax that hits the middle class and the working poor hardest.
Gov. Dayton's first budget included a sales tax increase, including a sales tax on kids that mowed lawns, shovelled sidewalks and did babysitting. It also would've taxed business-to-business transactions.
The point is that Gov. Dayton talks about taxing only the top 2 percent of wage earners but he's perfectly content to hike regressive taxes, too. The truth is that Gov. Dayton, like other progressives, loves talking about taxing only the rich even though he's perfectly content to raise regressive taxes, too.
Speaking of Gov. Dayton's cigarette tax increase, some people weren't too pleased with the idea:
Dayton also faced tough questions about his proposal to raise the state’s cigarette tax by almost a dollar a pack. Cathy Letourneau, who with her husband owns five Duluth-area convenience stores, said it would be a boon for black market cigarettes.
“You’re not going to raise the money you think you’re going to raise,” Letourneau said.
The cigarette tax increase is the most foolish tax of all. Mrs. Letourneau is right in saying that the net result of raising the cigarette tax would be the growing of the black market for cigarettes. That's what this study done for the Minnesota Department of Revenue said:
A 2009 study commissioned by the Minnesota Department of Revenue pointed out significant evidence of tobacco tax evasion after the state’s last cigarette tax increases in 2005 and 2006. Should Gov. Mark Dayton’s proposed 94 cent per pack cigarette tax increase succeed, it is likely that the state will see a large revenue shortfall due to smokers shifting their consumption across state lines, to the Internet, or to illicit black market tobacco.
That isn't all it found. This study done for the Minnesota Department of Revenue found some startling habits:
- After an effective 31.25 cent per pack increase from 2004 to 2005, the state’s foregone revenue increased 66 percent, from $9.3 million to $15.5 million.
- After an effective 46.75 cent per pack increase from 2005 to 2006, the state’s foregone revenue increased 103 percent, from $15.5 million to $31.5 million.
- The $31.5 million in revenue lost due to tax evasion in 2006 represented nearly 8 percent of Minnesota’s total cigarette tax revenue.
In short, raising the cigarette tax doesn't increase revenue. It increases the likelihood of creating a black market for cigarettes. Finally, it reduces the traffic going into convenience stores, which shrinks their sales tax receipts and their profits.
In short, it's a rare situation where the state and businesses both lose. Unfortunately, those statistics won't impact the DFL legislature's votes. Senate Majority Leader Tom Bakk announced that the cigarette tax increase will happen.
That says everything about the DFL's unwillingness to listen. So much for the concept of them being public servants. The reality is that the DFL is the slave to their special interest allies. Apparently, they aren't interested in being public servants.