Pawlenty vetoes tax hike

As he promised when the Minnesota legislature started ginning up new tax increases to cover a budget shortfall, Governor Tim Pawlenty vetoed the proposal early this morning before heading out for the state’s fishing season opener.  The legislature slapped the bill together in a day, trying to rush a solution through while political momentum for it exists.  The question for the legislature is whether they cast their line again, or cut bait (via Mitch Berg):

Gov. Tim Pawlenty threw a $1 billion package of tax increases back at the Legislature, issuing a prompt veto Saturday of the rapidly constructed bill.

Pawlenty spokesman Alex Carey said the GOP governor vetoed the bill around 3 a.m., just before setting out to mark the opening of Minnesota’s fishing season on White Bear Lake.

The tax plan passed the Legislature on Friday, after pulling the bill together from scratch the night before. Democratic House and Senate majorities sold it as a way to stave off deep cuts to schools, nursing homes and hospitals. The new tax money would flow to the special accounts for the three areas. …

“Governor Pawlenty feels the bill is like a bucket of leeches on the tax payers of Minnesota,” Carey said. “There was no way he was going to sign it.”

The veto was not exactly a state secret.  Pawlenty had warned repeatedly that he would not acquiesce to the DFL’s impulse to raise taxes in a recession, especially given the relatively high taxation rate in Minnesota already (12th highest in nation).  The Legislature easily passed the bill, but not by a wide enough margin to override Pawlenty’s veto.

What did the DFL want to hike?  They tried the class-warfare method (individuals making $250K and above), the populist/pitchfork method (credit card companies), and interestingly, the regressive/nanny-state method (alcohol sales).  Legislators took the unusual step of earmarking the revenues for specific programs rather than the general fund, which would have made closing the $4.6 billion biennial gap more complicated.

The state will have to make some hard choices to fix its budget problem, and that means that the political class may have to scale back or eliminate non-essential government programs while the tough times last.  If they choose to hike taxes instead, all they will do is guarantee that the hard times will continue for much longer as capital flees and businesses close.  Pawlenty understands that, and also understands that when people are forced to cut back and save, they expect their government to do the same.