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Editorial: Dayton’s proposals look to be risky

Published 9:39am Tuesday, March 5, 2013

This year’s legislative session may produce some of the largest and most costly changes in recent Minnesota history, changes whose combined effects are almost certainly unknown. Without making a judgment on the value of any of the huge taxation and policy proposals that lawmakers are considering, we do urge decision-makers to fully understand the likely impact of their possible choices. The issues are too big for the state to simply “wing it.”

Three issues in particular are of concern: the governor’s plan to massively increase sales taxes, proposals to raise the minimum wage and plans for a health insurance exchange in response to the new federal health insurance law. State officials said, in a conference call with reporters several weeks ago, that they had not done research or modeling to demonstrate the overall economic effects of increasing the Minnesota sales tax by more than $2 billion. Many think this policy would be very bad for the state’s economy. Others think it would be good. The reality is that nobody knows. It’s a shot in the dark.

A variety of proposals for raising the state’s minimum wage are afloat at the Capitol — so many different proposals that there is no way that the authors could have all done serious analysis and modeling of what the proposals would mean for the state’s economy. There may be hopes for improving the economy via a minimum wage increase, but no one has solid evidence that it would be beneficial. And certainly no one knows what combining a minimum wage increase with a gigantic sales tax increase would do. Nor, as far as we can determine, does anyone in a leadership position have solid research to show how those proposals would combine with major changes in health insurance (commonly called Obamacare) to impact the economy. Good? Bad? Who knows?

There are many opinions on all of these plans. What seems to be lacking is any sound, believable model showing how they would all combine to benefit Minnesotans — or, indeed, to show whether they would help Minnesotans at all. This economic tinkering strikes us as akin to driving at night without headlights. Until the work has been done to shed light on what it all means, major changes in economic policy are risky at best.