Minn. Veto Override Means Higher Taxes

Published June 1, 2008

The first veto override of Minnesota Gov. Tim Pawlenty’s (R) administration will create one of the largest tax increases in the state’s 150-year history.

A $6.6 billion transportation bill had, for some legislators, been 20 years in the making. But passage wasn’t assured until February 25 when six House Republicans voted with 85 Democrats for the first override of a Pawlenty veto.

Bond Proposal Rejected

In opposing the Democratic-Farmer-Labor (DFL, Minnesota’s Democrat party) proposal, the Republican House minority offered up a $7.6 billion transportation spending package utilizing general obligation (GO) bonds, a funding source that has historically not been used for road construction in the state. The minority plan was to use GO bonds–essentially the state’s credit card–to fund new road and bridge construction and would have reprioritized spending away from transit projects.

That plan, advocated by the Minnesota Free Market Institute in a policy paper titled “The Case for Using GO Bonds for State Highway Projects,” was repeatedly defeated in the current legislative session in a series of procedural moves by DFL-affiliated legislators on the House floor.

A day after the veto override, Pawlenty made clear what he thought of the legislature’s actions in a blog posting: “Yesterday the DFL caucus took a bucket of tax increases and dumped it on the heads of hardworking Minnesotans at a time when they’re struggling to pay food costs, when they’re struggling to pay health care costs, when they’re struggling to pay gasoline costs, and the economy is shaky and they’re worried about their economic future.”

Car Costs: $500 More

The bill will add more than $500 a year to the cost of owning a car for the average Minnesota family, according to an analysis by the House GOP staff. That would result from an 8½ cents gas tax increase, a ¼ cent sales tax increase for the seven-county Minneapolis metropolitan area, tax increases on the purchase of new cars, and elimination of the cap on license tab renewals (vehicle registrations).

While the metro county sales tax increases won’t kick in until July, the first installment of the statewide gas tax increase–two cents–started on April 1.

To administer the ¼ cent sales tax increase in the metro area, a new joint powers board–made up of the counties that authorized the sales tax increase–will allocate nearly $100 million in new tax revenue for new transit projects. The new money won’t be used to pay the operating losses on the existing transit system or for maintenance or new buses.

According to some taxpayer advocates, the new taxes and spending will do little to ease road congestion in the state. Phil Krinkie, president of the Taxpayers League of Minnesota and a leading opponent of the legislation, decried what he calls a legislative sleight of hand.

Spending Boost

“What a lot of people are starting to realize is that the sales tax increase that was being promoted as a panacea to traffic congestion has already been earmarked for new transit spending, with nothing left over for roads,” Krinkie said. “And creating a whole new level of government to administer the program, when three entities already exist, will only exacerbate the problems we already have in our transportation funding system.”

What made the veto override of the 2008 bill even more disappointing to Minnesota taxpayers was that the bill was $2.5 billion larger than a similarly constructed transportation bill from 2007. Lawmakers failed to override a Pawlenty veto of that bill.

Krinkie is a past chairman of the House Capital Investment Committee, the group responsible for putting together the biennial list of state construction projects. He said, “The legislators and lobbyists that are pushing for millions of dollars for gorilla cages, community centers, and ski jumps [projects currently funded by general obligation bonds in the state] know that if they are forced to compete with state road projects they are going to lose. So those people put pressure on the Transportation Committee, and we’re left with raising taxes as the only option.”

Mark Giga ([email protected]) is director of outreach at the Taxpayers League of Minnesota.