Revenue Commissioner Myron Frans talks about barnstorming for tax reform

The first things to draw the eye upon entering Minnesota Revenue Commissioner Myron Frans’ office are his pair of three-legged stools.

The two stools represent snapshots of Minnesota’s tax system taken a decade apart. The legs on one stool, marked 1999, read: 34.8 percent in income taxes, 34.7 percent sales taxes and 30.4 percent in property taxes. The stool labeled 2010 is far less symmetrical. The three primary-colored legs read: 26.6 percent sales taxes, 33.3 percent income taxes and — the big one — 39.8 percent property taxes.

“This thing literally doesn’t stand up,” Frans said, trying to balance the stool, which has become a popular prop in legislative committee hearings. “And it’s even in proportion.”

Scrawled across the base of the stools are the signatures of lawmakers that Frans has talked with at the Capitol and through the course of a statewide tax reform tour he started last fall. The signers include House Taxes Chairman Greg Davids, Republican Red Wing Sen. John Howe, House Property Taxes Chairwoman Linda Runbeck and Gov. Mark Dayton. So far Frans has gone to 29 meetings in 14 cities across the state to talk taxes. The goal: to gather input and put together a tax overhaul for the 2013 Legislature that will make the state’s system more balanced and fair.

“There’s no sense in writing another one of these,” he said, pointing to a stack of more than half a dozen tax reform reports commissioned over the years. Capitol Report sat down with Frans to talk about the Dayton administration’s efforts to reform the state’s tax system.

Capitol Report: You’ve been traveling all around the state for the last few months talking to Minnesotans about tax reform. Tell me what you’re hearing from people and what you plan to do moving forward.

Myron Frans: These meetings have been town hall meetings in some cities, they’ve been meetings before the Chamber of Commerce or before business groups [in others]. Whenever we go up to districts, we always invite the local legislators. The governor has been very clear that this is a bipartisan effort.

What we’ve heard in these different town hall meetings is a clear recognition that there is a problem. We explain to people what’s happened to our tax system and how complex it’s become and how much we spend in tax expenditures, and then we sort of turn it over to them.

Reducing complexity is a huge issue, and most agree that the system needs to be fairer. Now, “fairer” is a term that different people have different feelings about, but one of the universal things we hear about is treating equals as equals.

The governor has also been pretty clear that fairness means progressivity, so that’s an issue that we need to look at as we make changes to the tax system, to make sure that it continues to be progressive or even more progressive.

One of the true benefits of tax reform would be to broaden the tax base by eliminating expenditures and deductions and lowering the rate where possible. In these different meetings and in these cities, we have people who say they are willing to give up their preferential tax expenditure or benefit in the interest of simplicity or fairness.

CR: So what’s your plan moving forward?

Frans: We will gear that toward preparing a proposal for the governor, and after we get it ready, we will make it into a bill for the 2013 Legislature. The goal between now and then is to work with [Taxes] Chairmen [Greg] Davids and [Julianne] Ortman to share information and share ideas, because the more we can incorporate ideas from all sides and come to some sort of grand proposal, the better off we will be.

Our model has really been looking at the 1986 Tax Reform Act, when [Ronald] Reagan was the president in the White House, and you had a Republican Senate and a Democratic House. In that situation, they were able to pass the only true tax reform at the federal level, and that’s our goal here.

CR: What can you tell me will actually be incorporated in this tax reform proposal?

Frans: We really have not reached any conclusions. In January, I was in Perham with [Republican] Sen. Gretchen Hoffman and somebody asked, “OK, Commissioner, what are your ideas, or what are the governor’s ideas? What have you guys put on paper?” I held up a blank sheet of paper and said, “This is it.” What we are going to do is push ideas out to folks and have them react to them. This really is a rare opportunity for me as a revenue commissioner to have time to listen to people.

CR: The governor has said that he is planning on, in 2013, pushing an income tax hike that he had hoped to pass in 2011. Is that part of this proposal, or is that a separate effort?

Frans: That would be part of his consideration. The governor has made it clear; he ran on making the income tax system more progressive and adding a fourth tier, and he is certainly interested in doing that. He’s said time and time again that we need to look at the overall package before we can work it into a reform proposal. But if that is the overall decision, then yes, that would be included in that proposal.

CR: Do you know if his income tax proposal will be the same or different from his proposal when he came into office? Is there any sense of that yet?

Frans: No, there really isn’t, in part because of the numbers. We just don’t know what — if there’s an opportunity to broaden the base, or sales tax, or income tax, or corporate tax — we don’t know what the magnitude of those shifts would be and how much money they would generate and how much we would want to bring down the rates, or how much we would want to put toward buying back the school shift, for instance.

CR: Why do this proposal in 2013 rather than 2012?

Frans: I don’t think we could have gotten it ready if we wanted to in 2012. It’s really complex. We need this kind of time to put it together. That’s the reason we put together an advisory group of mayors, so they could help us on the LGA [local government aid], property tax portion of this, which is extremely complicated. We really do need all of that time.

CR: What do you think of some of the Republican tax reform proposals out there so far?

Frans: Regarding [a bill to appoint a tax reform] commission, the governor has made it clear that he wants us to come up with an action plan, so we are really geared toward creating a proposal that would turn into legislation that would turn into law. We think that’s the right approach in terms of action now.

With some of the proposals that have been geared toward the reduction of the statewide business property tax, the governor’s concern is, why give tax relief to one group? If we are going to give property tax relief, we need to give property tax relief across the spectrum. The other concern the governor has is, how do you pay for it?

CR: What do you see happening with the so-called Amazon tax?

Frans: I hope that it gets passed. Target and Best Buy have made this their No. 1 priority, and it’s not a huge income generator — it’s under $5 million a year once it’s fully generated — but we do think that it’s a step toward tax reform and fairness. We hope it can get passed, but the problem is what gets attached with it and where those funds go. We will have to wait and see how that plays out. We are encouraged that it’s been introduced in both the House and Senate.

CR: If it doesn’t pass this year, do you think it will be part of the administration’s 2013 tax reform proposal?

Frans: Now that’s one that I can safely say would be a part of it. If it’s not passed this year, we would continue to push for that as part of a tax reform package. At the federal level a similar bill has bipartisan support, but it’s sort of stuck right now.

CR: Do you think passing this tax reform package would be easier with a DFL majority?
Frans: As far as tax reform goes, it’s really charged based on what kind of representation people are trying to make on behalf of their constituents. Whether they are a Democrat or a Republican, they all have concerns about how this looks to their citizens. I think each legislator is going to use their own independent judgment, regardless if there’s a Democratic-controlled or Republican-controlled Legislature.