The Minnesota House of Representatives took a balanced approach to addressing the state’s budget challenges after adding a revenue-raising measure to the House omnibus health and human services omnibus bill (HF 2614).
The amendment, sponsored by Rep. Frank Hornstein, is expected to raise $55 million in FY 2011 and $101 million in FY 2012-13. While small, the amendment demonstrates how making revenues part of a balanced approach allows the state to maintain funding for critical services.
Hornstein’s proposal will help fund nursing homes and services that help the elderly and people with disabilities live independently. The House approved the Hornstein amendment on a 78-55 vote and then passed the bill with other amendments.
Hornstein’s proposal had two revenue increases. They are:
- Repealing the special tax treatment of Foreign Operating Corporations (FOCs). FOCs are parts of a multinational corporation that are incorporated in the U.S. but at least 80 percent of their income is from foreign sources. This foreign income currently is taxed at an 80 percent discount. The change would treat this income the same as domestically-produced income. This is estimated to raise $41 million in FY 2011.
- A Tax Havens provision that closes a loophole that allows companies to assign profits to a subsidiary in “tax haven” countries, thereby shielding it from taxation. This provision is estimated to raise $14 million in FY 2011.
This action is particularly significant in light of recent news. The Minnesota Supreme Court ruled Wednesday that Governor Pawlenty overstepped his authority when he unalloted $2.7 billion from the state budget in 2009. The unallotment ruling opens up the budget discussion, and provides policymakers with the opportunity to take a more balanced approach, one includes raising revenues and maintains services that are helping Minnesotans through these tough times.
New revenues need to be on the table. Solving the deficit through spending cuts alone would undermine a fragile and slow economic recovery. The Minnesota Budget Project recently released an updated version of our Revenue-raising options to help solve Minnesota’s budget deficit, which analyzes a menu of ways to raise revenue and a framework to raise them fairly.