(00:00:01) George Latimer is in the Studio's this noon not in his capacity as mayor of st. Paul but rather as chairman of the Minnesota tax study commission, which has become known not surprisingly. I guess as the Latimer commission the 85 legislative session opens next week and practically everybody agrees that taxes will be the key issue the debate will begin at any rate with the work of the text of the commission and will invite your questions for George Latimer about the commission's recommendations during the program today. Mr. Latimer welcome is nice to have you with us today. Good morning, Bob and also in the Studio's is mr. Bobby, bull the the executive secretary of the commission who did the staff work in case some of you have a question that is a little bit more technical than the mayor wants to deal with will call on Bobby will if we have to Well now mere there are several major points to this recommendation that you've come out with cutting income taxes is one of them simplifying the property taxes the third and extending the sales tax to services and clothing is a third you have already said and widely quoted at any rate of saying that the extension the sales tax is dead. So does that make the rest of the commission's work dead too? Not at all. (00:01:16) I haven't announced that it was dead. I've merely acknowledged the reality that a governor and A legislature during a period of great Surplus is not likely to be recommending an expansion of any tax and I acknowledge that we worked with our eye toward the future the Long Haul Bob. The last time there was a Tax Commission like this one was 1954 30 years have gone by we hope to have a set a framework around which legislators It can work for the next generation and making our taxes more understandable more fair and more productive and more competitive with other states. Therefore some of our recommendations. We acknowledge may not be (00:02:06) passed in the (00:02:07) first stage. In fact, the last time the effort was made in the 50s. It took about 11 or 12 years before any single recommendation was adopted. We hope to do a lot better than that maybe 10 years. But seriously, we recognize that it will take a long while but the package must in (00:02:27) fact be treated as an integrated package of it's going to make sense. What is most wrong with Minnesota's tax system currently (00:02:35) lack of balance a obscurity that bewilders even tax experts a lack of competitiveness in several very important areas a lack of accountability. Governmental units meaning there is a separation from the source of the revenue and the power to spend their there are many things wrong with the present tax system. This is not to say that over the last generation much good has not been accomplished by our legislators and our Governor's we are a great state. Our economy has done better than most States and much better than our Region's over the last generation, but there are real danger signs that commission found and I can particularize them later on as we talk. (00:03:27) All right. Well, let's open the phone lines for listener questions this noon on taxes 2276 thousand for those of you in the Minneapolis st. Paul area 2276 thousand those of you outside the Minneapolis st. Paul area can participate by telephone toll-free at 1-866-553-2368 one 865 to Nine seven zero zero and if you're listening in one of the surrounding states and are curious about Minnesota taxes. Well, you're welcome to it. Area codes 6122276 thousand. We have some people already on the line. I think we do. Let's take our first caller right now. Go ahead you're on the air. (00:04:07) It's been made clear already that the sales tax extension is in Jeopardy. And as I work for one of the state's major clothing retailers seems clear to me that a majority of the clothing purchased in the state is purely fashion clothing and as such not necessary, how does one go about Increasing one's impact in this area, especially when one's representative is Elton Road all and who was clearly a reactionary in this (00:04:47) area. (00:04:50) Well, let me Begin by defending Elton whom I don't know. I don't know what elton's use our but let me say that the point made is a very serious one. All of this is going to require a lots of Education lots of exchange of ideas and I've met with literally hundreds of groups mostly small but many of them larger and I've tried to make a few points about the probably the least happy in the most controversial recommendation. We've made relative to the sales tax and the point the caller makes is good one and that is that we recommend an expansion a broadening of it. The reason we're recommending a broadening of the sales tax is both to enhance Revenue but also to reduce the amount of volatility in our tax structure was not that long ago and the recession of 81 and 82 that Minnesota suffered more than hardship. We suffered a national embarrassment seven legislative sessions the loss of our AAA credit rating which is yet to be regained and a lot of disarray frankly in our economy as well as a lot of shortfalls going. On to the local jurisdictions. Now one of the reasons that occurs is that we are too dependent on very volatile sources of income are sales tax. Although the rate is reasonably high. In fact, the the breadth of it is very narrow and among the three or four narrowest sales taxes in the country. Therefore, we reduce volatility to the to the extent that we include a broader array of items which will be purchased in good times or bad. Now, the final point that the gentleman makes is that particular with respect to clothing. In fact, the purchase of clothing is somewhat less regressive then the other parts of the sales tax presently covered for the reason the caller gives all you have to do if you've got kids if you've got a family if you shop at all if you walk through any of the malls and you'll see the wide array of what I can only describe as discretionary kinds of clothing purchases to tell you that the real necessity Of life with respect to clothing can be acquired at a whole lot less cost than most people are presently spending. Now. There's a final point and I confess now particularly with my director here Bobby Bo that we do not have a real study of the underground economy. This is my observation. Minnesotans don't like to acknowledge it. We have an underground economy. But the fact is a nation does the Minnesota's part of the nation. There is a large cash economy out there for which people are paying no taxes at all. So if you think there's an inequity in anyone tax, there's nothing more unfair than the amount of volume of cash going back and forth in which nothing is taxed. Now one way to capture that cash that's out there and one of the at least good sign of identifying wealth is that the marketplace where we're purchases are being made and therefore we think an expansion of sales tax or I think can also capture some of the cash economy that is presently not taxed at all while the traditional No, property and traditional assets and wealth are being taxed (00:08:04) as you pointed out in response to my first question about this at the beginning of the broadcast the legislature and the governor are not likely to raise taxes when times are good. Is it going to take another recession to get this sales tax expansion that you want. (00:08:16) I think that of the matter of political reality that hard decisions are only made in hard times once in a while, we'll find an extraordinary leader who will tell us ahead of time that we must make hard choices now to avoid Calamity in the future but in a democracy, we usually do lag a little behind events. Therefore, I would predict that when the crunch comes and it will come and I don't pretend to know when it may come in 85, I'm a-comin 86 or 87 man looking at the national deficit in the rest of the problems. I think it might I personally believe will happen in the short term of 12 to 18 months when that occurs even with a better reserve at the state level. We're going to be facing some of the The colleagues we did in 81 then the legislature may have to make hard choices. We have given them some rational options around which to make that choice. (00:09:10) It's about 10 minutes past noon. We'll move on to another caller with a question on taxes. Go ahead and your ladder is listening. Hello. (00:09:17) Yeah, come on here. Okay. I was wondering about the sales tax extension and the high level of the sales tax at 6% being one of the highest in the country. Why is not something being considered too? If you're going to extend the sales tax and new areas to reduce the overall level because its effect on poor people is higher than its effect on people who can afford to pay. (00:09:42) I think that's a legitimate and and tough relevant question the actual tax yield if we broadened it as recommended would reduce the rate by seven tenths of a point we could reduce it as per your point. We could reduce it. Six percentage points to 5.3 and we did talk about it some commission members. In fact, we're leaning in that direction. I personally voted to keep it at the rate of did let's see. I guess I didn't have to cast a vote but I was supportive of that vote because I believed that by capturing that Revenue together with the rest of the changes we made we made it possible to cure any possible dislocations that might occur in the property tax changes. We were making recommendations for It produced something like a hundred and seventy seven million dollars The increased amount of sales tax. And with that we were able to make it possible for people and every property and income classification to enjoy a net real reduction in real taxes to be paid going all the way from $10,000 in come all the way up to the highest. Come and one of the reasons we achieve that we were able to combine the gains from the sales tax together with the homestead credit change. (00:11:07) Another caller is on the line waiting with a question. Go ahead your next (00:11:11) morning. Mayor Latimer. Good morning. I was wondering about this doesn't really I don't know if it's relates, but I was wearing this morning a newspaper that Governor perpich wants to assume most of the school financing within the state. I was wondering how that's possible with are already high property tax. (00:11:32) The governor's recommendation will have to do with a different way of the state financing local government. What we've done on a Tax Commission with respect to that question is we have said that the governor and the legislature of the future may well come up with a whole combination of changes as to how to redistribute that 70% of the state revenue that goes back to local jurisdictions schools and counties and cities but that we would not Not enter into the thicket of how to restructure local government Aid formula County Aid or in this case a school Foundation Aid therefore the short answer to your question is that the commission and its recommendations are neutral on the issues. Now being presented by the governor with respect to school. Aid. I have a as always I have a separate opinion just as a citizen and that is that I think that without getting into the details of the school plan of the governor, which frankly are too fresh for me to comment on I haven't even read them, but I really do believe in funding for education. I really believe that if it's the first duty of a Nation to defend its citizens from external attack surely. The first duty of the state is to educate its children and I think that our kids education should not be subject to the vicissitudes of the the wealth or Poverty of a given District that it's a state obligation to the extent we move in the direction the governor is talking about in a frankly. This is what the the earlier change was in the early 70s was a major State involvement in supporting education. I think it's a it's a right way to go. I think it's supported by minnesotans and I personally very supportive of that general direction without trying to turn this into a discussion of the governor's education plan, which I'm not competent to comment on right now. (00:13:28) It's about 15 minutes past noon. George Latimer is in the studio mayor of st. Paul chairman of the Minnesota tax study commission, and that's what we're inviting your calls on today. Let me ask you an income tax question. We've talking mostly about property tax or sales tax rather so far the I think it was mr. Ebell. As a matter of fact who came up with the comments some time ago that even if the income tax cut that the commission recommends is adopted Minnesota will move from the second highest income tax in the country to fifth-highest. Is that good enough? Will that make Minnesota (00:13:58) competitive? I have two comments. It's about that. The first is that if we dropped from fifth to second or from third to first, we would all be alarmed about that and therefore why should we not take some comfort and even a modest improvement in our stature relative to the competition question with the other state. So therefore in and of itself, it's important that the direction we set be away from being the champion in taxes in general and income tax in particular the second point, however, unanimously the commission has stated that there are clear signs of a correlation between the level of high income taxation in Minnesota and a lack of investment and growth in several important areas and that therefore the recommendation we make now which is dramatic in and of itself is still only the first major step toward a direction. We think should continue to have balance and to move away from the income tax. (00:15:00) Alright another caller now with a question for George Latimer. Go ahead. You're on the (00:15:03) air. Thank you. Mr. Mayor. There's been some speculation the paper recently that you may be considering a run at the governorship and I was wondering what portion of the commission's plan. Would you carry as part of your planks are part of your you know in your bit to be to be Governor. If you should run. (00:15:26) Well the commission's report was in the best sense a non-political nonpartisan bipartisan report by a commission made of members of every possible ideological political economic background tremendous group of people. And the worst thing that I could ever do for those people and for the state is to combine the work of the commission with any comment or any prospects of what I intend to do with my personal political future and I want to make that very clear we had Two retired ambassadors several Farmers three or four corporate head several Union head the former head of the urban Coalition in Minneapolis are very broad-based group. I don't in any way intend to separate myself from the quality the validity in the importance of that report. I really don't but it is separate from anything. I might choose to do politically now as to the and the political part of your question. I'm going to decide on February 22, I'll probably decide before then but I'll announced in February 22 whether I will be choosing to run again as mayor and asking people to support me for that purpose if I make that decision, then all the other options as to my future private or public are secondary, if the people choose to support me and reelect me and I and I do choose to stand for re-election. Then the rest becomes very academic. So on until I come to that decision was not much point in talking about what I would or wouldn't do. Should I be a gubernatorial candidate and Date in the (00:17:00) future. That's because it's a four-year term, right, correct? All right at 18 minutes past noon. We'll move on to another caller with a question. Go ahead. You're on the (00:17:08) air. Yes over the last year's the the state legislature and the governor have cut the the state budget quite a bit and my fear is that because the federal government is going to cut the federal government quite a bit that many of those expenses are going to devolve on to the state and that we will find ourselves in the same situation that we were several years ago with more money needed to be spent that when then we have and that sometime this fall when the federal government budget will finally come out to to be in its in its last form that the state will have to find money and that the six percent tax on clothing will be the easiest and the most expedient way of find that money is there some way perhaps that we can cut the budget. It's a instead of cutting it a billion all at one time. Cutting of the three four hundred million now and then coming back either this fall or next the winter when we know what the federal government is going to cut so that we won't find ourselves in the situation in which we find ourselves at the thing was three years ago when we had to call several special sessions to get the money that we that we found ourselves (00:18:18) short with respect to avoiding a repeat of 1981. The commission has done a number of things. Number one. We have recommended a reserve which is realistic and reflects the past errors in estimating what the state revenue should be we found that the error of the margin of error has been from 9 to 13 percent when pegged against billions of dollars. That's a whole lot of money there for a stronger reserved than historically in one closer to what the present Governor is recommending is the direction we're supporting that's number one one safeguard against what you described. Secondly we (00:19:00) I (00:19:00) have not gotten into the business of telling the governor and legislature where they should spend exactly how much they ought to spend. I think that would be presumptuous and Beyond frankly the body of evidence that we had to act on we acted as a tax policy commission and not as expending commission. That's a separate issue except insofar as we did say this obviously spending drives taxes, and we therefore said that the lack of competitiveness as well as the obscurity and the and the lack of accountability in the present tax system must be reformed but that we cannot have tax reform in Minnesota without tax reduction and quite evidently tax reduction carries with it a necessity to be more constrained about your spending. My final comment is at your opening remark was to defected state has already cut quite a lot. The truth is that we have not been cutting that much in the spending side. I don't say that pejorative. Or in any value since I just mean accurately speaking, we're talking about spending increases. I think in the range of 10 to 13 percent at the state level, which is not a spending cut (00:20:10) 21 minutes past noon. We have more lines open now to 276 thousand for those of you in the Twin Cities area with a question about the work of the Minnesota tax study commission 2276 thousand for Twin Cities area listeners, in other parts of Minnesota. The toll-free line is open. That number is 1-800-695-1418 hundred sixty-five 29700. We have another listener waiting. Go ahead you're on the air. (00:20:37) Hello. I'd like to set a scenario first and then ask you a question approximately three years ago. We moved into a new house and the real estate taxes on that house. The previous year were about $3,800 since that time in the three-year period during which time the real estate market is rather flat. If anything taxes have risen to the point where 1984 Tex was close to 7,000 before recent increase in the assessed value of about $50,000, which is going to push it close to 9,000. I'm given to understand how can one deal with a taxing Authority which seems to decide with impunity that that taxing Authority allows them to raise taxes to pay for poor administrative decisions putting the local city government into the hole of the County government into the hole. It gets the point where it becomes a strangulation situation and individual taxpayers have no way of combating this I'd like to hang up and ask you how one can deal with this and what the future (00:21:49) recommendations (00:21:51) will do to alleviate this problem. (00:21:54) Forgive me for chuckling but I the way I would deal with the fact you give me as I'd curl up in a fetal position and cry for a while that those numbers are staggering to me the increase in your in your taxes. Your your problems are related to local government decisions as well as to the level of support that comes to the local government from the state and federal side. It also relates to the present scale of property taxation the commission addresses only part of the problem reflected by your numbers. We do not deal with local government decision-making. But what we've done is this we did a major study which convinced us as it. Mission that to the extent that we have nearly three-quarters of a billion dollars transferred from the state for local government property tax relief intended to be that calling it homestead tax credit that in fact that very large expenditure of dollars does not meet its targeted objective of relief in relieving property tax and inequitable Andy end Progressive manner, but secondly, it ignores the wide disparity of differences between taxing districts. For example, if you are in a high tax district and boy, it sure sounds as though you are sounds suspiciously like a city like st. Paul or Minneapolis, then it means that the homestead tax credit gives you very little value at all. You have long since lost any benefit of the the homestead tax credit. Now what we have found by the study, is that that kind of spending Just being a large amount of dollars actually stimulates local government spending and that to the extent we use our property tax relief to reduce or local government expenditures by local government Aid to two governments at the local level. Then that makes it less of a stimulus because you have more accountability between the people who are spending and the people who are making the decisions to tax. So we think greater accountability will bring about more restraint at the local spending level. The other thing we have recommended about property tax is that we combine the value of property as well as the income for purpose of the circuit breaker. That is true that some people have modest incomes but a high valued property. It is also true that the value of the property itself reflects. Some wealth and that a circuit breaker should be based on that combined wealth. We've also recommended a equalizing and reduction of the mill Levy across the state at the level of about 20% for a lost art of purposes. Now the combination of recommendations we've made now you haven't given me an important part of your equation and I'm not asking that you do so but you haven't mentioned your income and from what I'm hearing about your taxes. I hope you have very good year in income. But if you take your income tax and your level of income together with the value of your home, your classification will enjoy under our recommendations using illustrations that I've talked to you about will enjoy an actual drop in your total tax load the total of income and property tax relief is pretty substantial cross every classification and we have classifications for example of a With a 50,000 dollar income and a $200,000 home or a person with a 10,000 dollar income and a $40,000 home every one of those classifications whether you individually enjoy that drop. I'm hardly competent to say because I'm not a CPA or tax person. But if you give those numbers to either for yourself or your tax person you will find probably that you're in a classification enjoys a net reduction in your tax load, which is really what we ought to be about doing (00:26:22) about 20 minutes past noon more listeners are waiting with questions on taxes. And your next go ahead please (00:26:27) yes, mr. Mayor. I'm in a very similar situation. I live in a multiple-unit dwellings a triplex in South Minneapolis. I'm an owner-occupant and last time the legislature was looking for money. They passed a resolution almost eliminating the homestead credit for owner-occupied dwellings, and I was concerned about what the commission had recommended on that particular issue considering that the inner city. Minneapolis and st. Paul have a higher percentage of multiple-unit dwellings duplex Triplex Etc and some of the tax policies seem to discourage owner occupancy (00:27:06) other than the combinations that I talked about in my previous answer we did not additionally address what you're talking about, which is do we treat property differently residential property it differently on whether you have living in it or not. What we've done is recommend. We didn't talk about reduction of classifications, but earlier I talked about the obscurity of our present system our property tax classification system. Is he all time national champion for obscurity? There is no question about it. It's not significant that we have 40 to 70 classifications. It is significant that no one agrees whether it's 40 or 70. That's how obscure we are. Now what we've done is reduce it to three. Recommended reducing it to three treating residential property homesteaded separate from commercial and industrial property. Therefore what you sound like what you're talking about is property that you're living in but you're also getting rental income from that would be treated as residential property. The net result should be what I've described to the previous caller. And that is the combined combination of a reduction. If your classification of income and real estate tax fits into any of the categories that I've talked about. (00:28:26) We have a complex property tax system and I think the legislators who worked on those different items over the years would argue that it's complex, but it's complex because it adds fairness now when you make the tax simpler, do you lose an element of fairness? (00:28:42) Well, you can't tell me that those 40 to 70 classification there because the fairness I believe it's because of a desire to cure every possible. Problem there is in society on the property tax which really isn't a proper tool to use and much of it maybe well-meaning. So, I believe there may be some truth that no simple tax is fair and no fair tax is simple, but this is (00:29:08) carrying it to a ludicrous extreme (00:29:11) an example is that if you're one of the three Congressional Medal of Honor winners in Minnesota, then you will have a different (00:29:19) property tax (00:29:20) classification and other on the reverse side, if you suffer disabilities of one kind and another then you pay different property tax that we think that those kinds of Remedies ought to be dealt with directly and not indirectly through the property tax (00:29:35) or listeners waiting also a couple of phone lines still open in the Twin Cities area at 2276 thousand. If you have a question from are Lattimer about the tech study commission, our toll-free line is 1-800-695-1418. You're next. (00:29:51) Yeah. Heard a couple comment. I'd like to make one I feel from different things. I've read that a lot of the pressure to lower taxes by business groups is kind of a red herring the statistics. Don't prove what they're trying to say and it as example Joan girls reports morning showed that 83. We broke records in new newly Incorporated businesses both from Minnesota and coming into Minnesota from other states as a report in Inked magazine here a couple months ago rated Minnesota very high as a good place to come in starting your business. That's one thing I'd like I said things that they've been pushing this lower taxes, but that they don't have a fact just answer it your argument that we're running business out or nobody wants to come in here. (00:30:51) Another want to respond to that one is the man is the time. Is there. Is there more as your second part to that question. (00:30:58) No, but I had another comment to (00:30:59) make all right. Well quickly then (00:31:01) add new taxes if you take pride in your home and you want a nice yard nice driveway and so forth. You have to pay for it the same with your state. If you want to get your kids take care of your old folks have good highways and Parks. You've got to pay for it. You drive from Minnesota to South Dakota. That's like going from park to a slum. (00:31:25) Do you have South Dakota less news (00:31:26) Bob? Oh, yes. I think we're going to hear from some of them (00:31:34) falling apart. (00:31:35) You better quit before you get me into Trouble I'm not getting in trouble. I'm (00:31:39) just I'm just stating that if you they have low taxes, they don't apparently they don't want those things there but in Minnesota you driving the small towns, most of them are people really take pride the town's take pride May I comment want if you want these quality things you've got to pay for them. (00:31:57) I'd like to comment. I I think that you just made a tremendous statement and I would both as a tax commissioner and as a citizen of Minnesota, I would subscribe to every single thing you just said and without and without any equivocating or rhetoric. I just think that you what you just said represents what minnesotans are like, they really believe as I said earlier for example, educating our kids and caring for people in need and I think that's what we're about in Minnesota our tax commission and you're also right by the way that there is not there is plenty of evidence that our business growth and jobs growth have been very healthy. The years and I said that earlier in the program and I report has ample proof of the success that we've had. So Minnesota is not a terrible place to be it's a wonderful place to be having said all of that and without demeaning any part of what you said because I moved by what you said about what a community is about and how we should expand our resources. We do find I must tell you sir a real correlation that's almost impossible to ignore between the high level of income taxation and not a drop not absolutely drop in jobs, but a lack of we think adequate job growth in three fairly important areas that will be important in the future of of retail and wholesale trade of fire fire, meaning of Finance insurance and real estate and related service Industries. And so we think that it would be a real mistake to ignore those correlations. Irrespective of any political or rhetorical arguments that either business or non-business people might make it is true. We think that the level of income taxation and level of Taxation in general acts as at least a danger sign for inhibition of our growth in the future and that we believe that we can make our tax policy more coherent more plain and more accountable and that therefore the kinds of concerns that you and I care about that you mentioned so eloquently should be addressed but should be addressed in a plane or fashion and we think more tough minded about the way we tax people. (00:34:17) I suppose I should mention if there's somebody in South Dakota who's just burned up over our Brainerd collars comments about your estate. The telephone number area codes 6122276 thousand if you cannot restrain yourself from commenting on that anyway, here's another listener with a question on taxes. Go ahead please (00:34:38) yes, good afternoon. Mayor. Good afternoon. One thing I've noticed in your comments there and in reading the issues is that someplace along the way the car cut in front of the horse. It's difficult to take issue with taxes reform in that unless we address the expenditure of the state and no place of I noticed anything mentioned that this and one other comment we have to disregard tenure and order to get quality teaching. Thank you. (00:35:09) I won't comment on the last item. Obviously it has to do with education, but I should tell you that. We do recognize the relationship between spending and taxation by the recommendations that we make we say it's pending does Drive taxation that a reform in Minnesota means a reduction. I hope I understood your earlier comment. And therefore we do address spending in that way. We do it in one more way if I may say to the last caller and to the rest of you we also say let's be planar about what we're going to spend besides be making it more accountable. We think accountability will restrain spending that we ought to have a budget proposed by the governor followed by public hearings and that we ought to then have something like a budget resolution passed at the very beginning of the legislative session so that the the state and everyone the taxpayers will know what the legislature is intending to spend and then the decisions we made against that background instead of against this idea that you're Being one interest off against the other it should be coordinating all of them against what we consider a legislature considers to be a ceiling and what the spending should be. So the budget process together with planar tax policy. We think will make taxes more accountable and restrain spending. (00:36:37) But three-quarters of the state budget goes back to local units of government as you have pointed out for property tax relief for the school system for local government Aid welfare the whole ball of wax. What percentage do you think should be achieved in order to bring in this greater accountability that you're talking about? (00:36:56) It is an issue as to what (00:36:58) percentage would make it more or less accountable. It is a (00:37:01) format which that Aid occurs part of that 70% that you refer to involves three quarters of a billion dollars. That's a ton of money as I mentioned earlier of homestead tax credit that does not work to meet its objective. I know it's a sacred cow. I know people view that as (00:37:20) as their safety net (00:37:22) but in truth are much better ways and better targeted ways of achieving that safety net against inequity in our property tax than that. Therefore if we move away from the homestead credit, then we're going to be moving away from stimulating local. Of spending and making it more accountable that may not reduce the total percentage being transferred from the state to the local government. But it but it will make local government more accountable for what it does choose to tax and spend (00:37:50) okay. It's about 20 minutes before one. Here's another caller with a question. Go ahead (00:37:54) please. Well, I'd like to ask me or Latimer how our state's residency requirements compared with other states for state aid, and I've heard this and I'd like to get it clarified if there is an influx of people in the summertime will come to Minnesota and use the state aid as their primary means of support now. I know we've given a lot of care to the Vietnamese and I'm I think that's good. It shows how we do care. But apart from the Vietnamese Community. Could you clarify the residency requirements (00:38:27) not very well. I'm not sure. I know I hope you stay on the line because I need you to clarify what you're saying right right now. An open society and people can move from one state to another and if you do then you're entitled to the services of that state of you timeout residency requirement for different kinds of benefits. I see (00:38:52) are you arguing that Minnesota is a mecca for welfare (00:38:55) recipients. And part just that there are requirements don't require a person have to live here a certain amount of time to get maximum benefits and a no-questions-asked sign up and leave when you want. (00:39:14) Thank you. I do understand your question much better. Now the plain answer to your question is the tax commission did not address that issue. The Tax Commission did not address a lot of issues that have to do with spending. For example, we decided very early and I think wisely that the whole distribution of benefits between welfare and not for example, the Citizens League early on said we want you to examine how we deliver State Services is whole notion of privatization and alternative Service delivery, very interesting area, but it's a massive area and for me or the Tax Commission to pretend to have knowledge about the math of welfare system and I don't mean and that pejoratively it's a large amount of money or the highway expenditures without examining I think would be very unwise so with the plain answer to your question is we did not address various eligibility requirements not only for welfare, but for all the other expenditures at the state (00:40:07) level you just had to draw some lines on things you are able to look at right? Sure did (00:40:11) yeah got into plenty enough trouble. Just what we (00:40:13) did do. All right. Here's another caller with a question. Go ahead metal atom is (00:40:17) listening. Yeah, mr. Mayor. I live in Rochester and you alluded earlier to Governor purposes announced intention of trying to hold State increase spending to 10 to 13 percent something like that. And of course we had one percent extra tax added onto our sales tax here in Rochester to help build a Convention Center. So we're experiencing a higher taxes here. But my question is with this announcement by the governor. Doesn't that sort of not going to sort of negate the efforts of your commission to, you know, get our tax picture in order and Possibly less of a tax burden. I'll hang up. Thank (00:41:01) you. Thank you. I don't know what the governor's budget is going to be my comment about 10 to 13 percent had to do with all really over the past years, you know even during the recession period what we did was not reduced spending in great amounts. What we do is shift the revenues a good deal in frankly. We're without any further shift. That's one of the problems. The present Governor have is that there aren't any more ways of raising money, except the old-fashioned way of taxing for So my answer to your question is that I don't think it's clear at all from what the governor has said so far that a large part of our recommendation may not be accommodated by this budget. I think it's possible to go a long way toward achieving some simplification In fairness to the present Governor. I I don't know how much of this he is made in public documents, but I know for sure. I can tell you two or three things from talking to his staff and and to the governor directly. He's going to propose a real simplification of the income tax whether it will conform completely to ours, we're recommending Conformity to the federal side of the federal taxable income as a standard and a one-sheet state income tax it conforms with the federal he's going to come very close to that. I know that from what he has told me. I also know that in the works is a recommendation to drastically reduce the number of classification for property tax, whether it's down to the level we talked about or not. I doubt but for sure will be a dramatic reduction in tax classification. He's also I don't know what he's going to be doing about the issue of accountability and homestead credit and all the rest so sounds to me like the governor has been pretty receptive to much of what we said given the caveat that I made earlier that in the real world. I don't expect Governor's or Or has to be talking about any kind of tax increase during a period of great Surplus (00:43:03) mayor. Let me ask you a personal opinion now not as you're not in your position as chairman of the stack Tech study commission. Do you think it is feasible to reduce the level of government spending? I mean President Reagan has not been able to reduce the overall level of government spending you as mayor of st. Paul in that been able to reduce the level of government spending. How is it possible to talk about that? (00:43:23) Practically? I think we can time. Thank you for making the caveat that I'm not speaking of the Tax Commission. I have strong feelings about your question. Therefore. I'm going to answer pretty strongly and I speak for myself. Only number one as a as a people throughout the state throughout this country. We've got to be more honest and more tough minded about the expenditures. I think that we can reduce government spending but only if we're more honest about who is really a need and who is not in need. And frankly no one Democrat a republican is willing to take on those very tough issues. Let me give you an example. We have a massive growing federal budget related to what are called entitlements that growing frankly just as fast and the most is largest our defense budget. Yet of that budget of entitlements 84 percent of that expenditure is not related to need. Now what we've done is we've taken a 16% of the entitlement budget that is related to need we've cut it in half. We've been plenty tough with the people who can't help themselves. We've been plenty tough with a needs-based entitlements. We got lots of Courage when it comes to that but we got no courage at all when it deals with people like you and me the middle class and those things that we like to call our entitlements. So we're not besides not be able to reduce our deficit besides not being able to make differences in us were more sensible about what we spend and arms besides that those are to me the easy ones. But we've also got to be more courageous than we've ever been before about the whole issue of entitlements. Now, we want to talk about local government state spending the truth is that and I guess I'm a little bit biographical here the truth. Is that are at our local level. Have been you're right. We don't have a net reduction in spending but we have now 730 fewer employees than we had. When I took office. We are spending 20% lower payroll than we had them. When I took office. We have reduced our bonded debt by 60 million dollars out of $290 230 are overlapping bonded debt. So are bonded debt is now lower than five percent of our total Market as distinguished from nine and a half percent. When I took office, I think a people can get together and say these things are important we're going to be fiscally more prudent, but we're going to have to be more courageous and frankly more Humane. So I really think it's I know it sounds political but I really think the biggest fraud in the nation is acting as though the people in need and Welfare are what's costing us all this money. Most of the people who get who are based on needs based entitlement are children and women that's the truth and we don't want to deal with that because it's a harsh truth the overwhelming number of dollars. We spend on needs-based singer have to relate to people who are children or women supporting them a single head of family and that we've cut their income real dollars by 56% now, I think that's outrageous but it's really outrageous when you look at how we've left untouched all the benefits for the middle and the upper middle class some (00:46:59) tough talk on spending from your Latimer will get some more tough talk on taxes here with another caller. Go ahead, please you're on the air. (00:47:06) Yes. The reason I'm calling specifically is as a preamble to the Tax Commission. I think that was in bad taste not to ask for a revelation from the members of the commission as to their tax returns themselves. More deeply What specifically are they doing with their tax returns other words, we're talking about loopholes volume of filling gaps Etc and gives a sense of honour with a sense of Honor. We look at the text picture from a clean slate before we get into issues because we find that the game start if we get the wrong people on text commissions and the people with no money who cannot and have a very difficult time paying their taxes have to borrow money to pay their property taxes and their heating bills and then people who are making all the money will continue to make more very Latimer. I am asking you as a citizen of Saint Paul to expose to the public what your tax returns have been during the last three years to identify with his sincerity that you purport to have towards the city of st. Paul and In the future possibly the state of Minnesota. I think it's a fair request and I would like to just get off the air with that note because I think the people demand to know in spite of the fact that maybe there's a little bit of a Chagrin there on the part of yourself to reveal that. Thank you. (00:48:47) You know, it's rarely that I say that a question doesn't deserve the Dignity of a reply, but I think I'll say it for anonymous caller to tell me that I've got some obligation to reveal my income and my income taxes. Am I all my other taxes is some way of impugning the Integrity of a whole commission. I think it's ridiculous. I've complied with all the laws with respect to income tax and any other kind of tax as far as what I choose to to publish your not choose his is presently dictated by state and local laws. I've complied with all of them. I make no apologies either to you or to anyone else nor does any member of the commission we have 16 members of the commission from every Walk of Life. They worked for nothing. They met for hundreds and hundreds of hours. They joined and voted unanimously on this package and the idea of saying that every time a group of minnesotans get together to make a decision that we have to give them a litmus test to find out whether or not they are just seeking Help themselves. I think is outrageous. I reject it. I deal with Community groups. I deal with councils and Boards all over Minnesota all the time. And it never I never dreamed once of going to a neighborhood meeting and telling people now wait a minute. Your committee has recommended that I do the following things with the city money. I want you to step forward and reveal all of your personal business and what you gain from this personally I find that's outrageous. I don't think that's what minnesotans expect of each other. I hope that my response has been playing (00:50:20) him about six or seven minutes left for more questions on taxes and will take you next. Go ahead. Please mere Latimer's listening (00:50:27) different questions to ask me. Yep. First one has to do with possibility of having someone like Peter Grace do a Grace report for Minnesota and how we can possibly push for having the grace report implemented nationally so that we would have more available. They think would be wonderful if we could because it does not take away from programs really operates more efficiently question. Number two is shouldn't we aim toward having individual units do their own taxing and collecting because we learn now that about 40% of every dollar that goes to federal government comes back to the local units because back in only 60 percent rather than a hundred percent and we could get a lot more bang for our buck and lot more accountability. If each unit taxed for itself and spent for itself. Thank you Alice. (00:51:18) Okay, Mary Latimer right part 1 Greece heart (00:51:21) what part 1 of The Grace Commision the listeners probably know that that's a national commission appointed by President Reagan and a headed by Peter Grace which made a large array of recommendation for cutting spending. I think a spending or expenditure commission or examination at the state level. I think is partly under way. I was talking to County attorney Tom Johnson. Hennepin County and he's engaged in on I'm sorry. I can't be more precise but it's a it's a state appointed commission relative to spending now whether it goes across all the Departments. I don't know but I think you're the caller is correct to the extent that we ought to be examining expend expenditures and how we ought to be making them and maybe even alternative service deliveries before we go further in that area. I subscribe to that. I must add that. I'm not a great fan of mr. Gray Thor his Commission because a lot of tough policy judgments are being made and the Guides of talking about efficiency when you're really deciding policy judgments as to whether programs ought to exist or not. It's not a matter of it's making a decision that a program is not needed. That means a people being served by that program don't have those needs that ought to be addressed by the federal or state government and to me that's for the people to decide through the electoral process through governor. The legislators and not by a commission the second point you make however, I would like to address even more directly and that is I don't believe that in Minnesota. It would work well or humanely for us to divide up into what can only be described as separate principalities with respect to how you raise your money and expand it say you're in a suburb say you're in a bedroom community and you've got no retail base. Whatever. If you have you may not have any ability to raise any sales tax at all. What if you're another suburb and you've got 90% of your property is commercial, then you would be able to raise millions of dollars and not have to make Noah really no tough decisions, whatever and the peep the residents wouldn't have to pay anything for the services. The result would be a wild disparity in the ability to educate our kids and to provide for basic essential humane services for people. I'll need as well as regular Public Services like police and fire and shoveling snow. So, I think there's a good reason for us to have a Statewide Public Policy for raising money with strong local governments and local accountability in the way that they do raise money. (00:54:03) We're about four minutes left. And here's another listener with a question. Go ahead. (00:54:06) Please morning morning afternoon. I have a question that just a clarification. My husband is a retired postal worker. And as of now we can deduct his pension or a portion of it from the state tax. And what's a little what little reading I've done on this new commission. They're telling us that he no longer can claim his pension from the state tax now Social Security. I understand continuing both state and federal and we can't wear will not be able to claim either one. Would you clarify that for me? And if so tell me the reason (00:54:48) why I'm afraid I might be losing a fan because I I think I have Bobby Bowl to help me on this one side not miss stated. But basically to the extent that pension benefits exceed the amount presently taxed by the federal government. They would present they would again be taxed in Minnesota, which I forgotten the break off point, but I think it was 18. Thousand this point we have a 11,000 exclusion. The reason for doing that was to treat all income sources equally regardless of the source. It's not unlike the president's proposals. He's also recently made from the treasury Department. So the answer then though to the caller is that she is correct that the pension would be taxed as income, but I thought there was a point at which it wouldn't be taxed on until it exceeded a certain amount. I'm not sure where the cutoff it would be. It would conform to the federal treatment. I think what it is is relevant to note here is that under the tax commission's proposals that part of the trade-off for that is is a significant lowering of the effective rates on all income tax brackets. It goes back to the sales tax argument that when we did the income tax changes we did make it the trade-off in terms of lower (00:56:10) rates. That's kind of a complicated area is (00:56:14) I hope we've been clear I we've tried to be but I think that the caller is correct. That pensions will be taxed. We tried to treat income as income. Whatever. It's worth I (00:56:25) think is a good General remark. I think we have time for one more brief question and equally brief answer. Go ahead please quickly. (00:56:32) Okay. I just have a comment and that is I've lived in this state for 57 years. I've worked here for 31 years. I've lived in five different parts of the state. I don't work for any unit of government. But I am impressed with Governor or with mayor Latimer and all the public officials of the state. I just want to say I think I've dealt with a lot of people I'm in they say one of the helping professions and I Minnesota has better government than it deserves. Okay, (00:57:01) no comment (00:57:04) mere Latimer. Thank you very much for coming in and talking Texas with us today. George Latimer is Chairman of the Minnesota tax study commission, and we also heard very briefly from mr. Bobby will be Secular director of the commission legislature begins work next week and we'll use the findings of the commission at least as a starting point. Although as mere Latimer says he'll not be unhappy if it takes about 10 years to implement the recommendations briefly the weather forecast. Mostly cloudy in northern Minnesota chance of light snow this afternoon partly cloudy in the South with highs ranging from the mid 20s to low 30s in the north mid 30s to around 40 in the South a good chance of snow developing over Minnesota tonight with lows 15 to 25 and there's a chance of more snow tomorrow, especially in the Northeast. It could be mixed with a little light freezing rain in the southwest highs tomorrow low 20s to low 30s weekend is made possible by economics laboratory products and services for household institutional and Industrial Cleaning worldwide. Thanks to engineer David sleep and Dorothy Hanford for answering the telephones. This is Bob Potter. Twin Cities forecast partly sunny this afternoon the high ranging from the middle to the upper 30s tonight. Mostly cloudy 40 percent chance of snow 50% chance of snow in the metropolitan area tomorrow the low tonight around 10 to 24 in the high tomorrow in the upper 20s. This is ksjn in Minneapolis and st. Paul.