Saturday, February 27, 2016

Minnesota's Budget Hoax

"Like with people, it is not how much you make, but it is how much you spend"

I have some bad news for the good people of Minnesota. In fact, even if you are not from Minnesota, this state is a good "lessons learned" on how not to budget. Before I go into detail, I will put my summary first. This state spends money like a drunken sailor. No, that is not right. As Senator McCain once said (who is retired Navy), even drunk sailors quit drinking when then run out of money. Not so much for this state.

How bad is this crack addiction we have to growing state government? As the Chinese have said, a picture is worth a thousand words:

State              Top Marginal Rate        Amount Top Rate Taxed On      SS?      Mil Ret?

Minnesota               9.85%                  $155,000                                      YES       YES
Wisconsin                7.65%                  $244,270                                       NO         NO
Iowa                         8.98%                  $  69,255                                       NO        YES
North Dakota           5.68%                  $405,000                                       NO        YES
South Dakota               0%                   $          0                                        NO        NO

The above shows how Minnesota ranks "in the neighborhood". Wisconsin and Iowa are also known as high tax states. But Wisconsin is a distant second and Iowa is close to Minnesota. HOWEVER, please note that neither Wisconsin nor Iowa tax Social Security. For that matter neither do either of the Dakotas. Plus in Wisconsin to get up to the top marginal rate (which is 2% lower than Minnesota's) you need to make $100,000 more per year.

I will put a few more states here for further comparison:

State              Top Marginal Rate        Amount Top Rate Taxed On      SS?      Mil Ret?

Florida            0.00%                             $0.00                                            No         No
Texas             0.00%                             $0.00                                            No         No
Nevada          0.00%                             $0.00                                             No         No
Michigan        4.25%                             FLAT TAX                                     No        No
Illinois            3.75%                             FLAT TAX                                     No         No

From these states, you can see two things. First, is there any wonder why Florida, Texas and Nevada are three of the most popular "bug out" states for Minnesotans? Next, who would have thought two states like Michigan and Illinois, two very blue states, are beating the snot out of Minnesota.

So what do we do? First off, slay the biggest dragon. Our state spends an obscene amount of money on government education. And it is proving to be a terrible investment. I would like to see that amount cut by a third. We can do that by using vouchers. In other words, rather than spending 30% of our budget on education, we should spend 20%. That would free up over 5 billion dollars a year.

Next, our health and welfare expenditures account for over 25% of the budget. EVERYONE who is honest knows there is at least 20% fraud, waste, abuse and redundancy in these budget line items. So we should cut them by 20%. Force them to clean their own houses. That would save the taxpayers another 3.5 billion dollars a year without sacrificing services.

By the way, I did not even address the confiscatory business tax we have in Minnesota. What I will say is this - the seniors in this state are not stupid. We know we are one of only SEVEN states which tax Social Security benefits. And why does that make a difference? If both spouses are retired making $20,000 each on Social Security, they are paying almost an extra $3,000 a year to live here. Plus, with one of the highest marginal rates in the country, it only gets worse. Especially against states which have no state income tax.

So there it is. A bit long, a bit boring for some. But the facts in this post speak for themselves. We have a huge, huge problem in this state. And that problem is called largess. We have grown our government to be a beast who cannot be fed enough. As Lady Thatcher said (paraphrased), "Soon we will run out of other people's money to maintain it". And that soon might be right now.