North Star State takes a page from the South

I'm a Southerner by birth and heritage who has gratefully lived in the North Star State for almost 40 years.

I know the difference between Union states and Confederate states when it comes to taxes and spending and investment in community -- stuff like schools and bridges and parks and health clinics and country roads.

And so it was painful, as Gov. Tim Pawlenty's terrible swift unallotment sword began to swing last week, to see my beloved Minnesota pursuing a fiscal course like that of my wrongheaded kinfolk.

The facts are these: Among those 20 states with the worst budget crises, only Louisiana, Georgia and Minnesota have failed to raise taxes or are no longer considering tax increases.

Gov. Pawlenty has told us repeatedly that it would be unusual to raise tax revenues in the midst of a recession, even if it's just on those high-income households most able to afford it. But a recent report from the Center on Budget and Policy Priorities demonstrates that the opposite is true.

Almost two-thirds of the states have either raised taxes since Jan. 1, or are still considering that alternative. Lo and behold, as my grandmother used to say, it's not unusual at all for states to raise tax revenue when running disastrously short of tax revenue.

For more context, consider a report earlier this year by the National Conference of State Legislatures, which ranked the severity of the state budget crises. Minnesota's problem was ranked 10th worst, with a shortfall amounting to about 15 percent of its total general fund.

Of the 20 states with the worst budget problems, only Louisiana (the home of Gov. Bobby Jindal, another anti-tax conservative who may be seeking the White House), and Georgia refused to raise new money to balance their budgets.

The question transcends party politics. A large bloc of predictably "red" or conservative states in the West have accepted reality and raised revenues.

Many government bashers in Minnesota over the years have criticized our reputation as a high-tax state and asserted that we should become more average. But even the most doctrinaire conservatives quickly add that they wouldn't want Minnesota to become a bottom-ranked tax state, like Mississippi.

States at the very bottom of the tax rankings historically have dismal quality-of-life indicators, larger inequalities in income and wealth, and few people who want to visit, much less live there. Those states also have underperformed Minnesota on basic economic indicators of business health.

Soon, we might actually be a low-tax, low-performance state. In recent years our economy has been underperforming the nation's, for the first time in decades.

We don't have to take the word of advocates for education, transportation or the elderly on the need for states to raise tax revenue. Many reputable economists have been arguing that raising revenues, especially on higher incomes, is less damaging to the economy than a cuts-only strategy.

Ray Scheppach, executive director of the nonpartisan National Governors Association, which Pawlenty has served in leadership roles, had this to say recently.

"In this past year, governors have worked hard to balance the budget by cutting spending first, while protecting services like Medicaid and education. Unfortunately because of steep decline in state revenues, they cannot rely on cuts alone; states must find new revenue sources for fiscal 2010."

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Dane Smith, St. Paul, is the president of Growth & Justice, which describes itself as "a progressive think tank committed to making Minnesota's economy simultaneously more prosperous and fair."

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