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Bush budget cuts reverse policy, call for less 'S' in IRS
David Cay Johnston, New York Times
April 10, 2005


After widely publicized hearings seven years ago, Congress passed a law ordering
the Internal Revenue Service to enhance services to taxpayers, improvements that
were financed by cutting enforcement of the tax laws to make sure telephones
were answered and forms were readily available. That era is now ending.

The IRS will close up to 105 of its 367 walk-in centers, which dispense forms
and advice, said Mark Everson, the agency's commissioner. Hours when the IRS
answers telephone calls will also be reduced, he said.

After the current tax return filing season ends on Friday, people with simple
tax returns will no longer be able to file using a touch-tone telephone. Last
year 3.8 million taxpayers, most of them with low incomes, used this Tele-File
system.

President Bush, in his budget for the fiscal year that starts Oct. 1, wants to
cut money to respond to taxpayer requests for help by 1.3 percent and money to
reach out to taxpayers by 6.8 percent compared with the current fiscal year.

The $57 million in proposed cuts is about one-half of 1 percent of the IRS
budget of $10.2 billion.

The walk-in center closings and related cuts will save $17 million to $21
million annually, Everson said.

More service cuts are likely in the years ahead because of tightening budgets.
Everson said that to save money, the IRS will steer taxpayers to the Internet to
obtain forms and automated answers.

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If it stings like a tax, call it one, bill says
Patricia Lopez, Star Tribune
April 10, 2005

A tax by any other name stings just as much, the way Rep. Phil Krinkie sees it,
so why not make it the law that almost any money state government collects from
citizens be officially counted as a tax?

A bill proposed by Krinkie, R-Shoreview, chairman of the House Taxes Committee,
would do exactly that, defining as a tax any payment demanded by government
except a direct price paid for a specific service, and blowing a rhetorical hole
in his governor's proposal to raise millions in state revenue through new and
higher fees, surcharges, revenue accelerations and so forth.

Should Krinkie's bill become law, Gov. Tim Pawlenty's $200 million licensing fee
for a state-tribal casino suddenly would count as a tax increase. So would his
$36 million acceleration of sales tax on car leases.

And the $80 million he would raise from extending a higher sales tax on liquor
and car rentals.

Not to mention the $79 million he's proposed in other assorted fee hikes and
surcharges.

In fact, Krinkie's redefinition would make Pawlenty, whose no-tax-increase
pledge is his political signature, responsible for more than $400 million in the
next biennium.

So why is a fellow Republican setting up his governor this way?

Krinkie, possibly the state's purest elected tightwad, has a simple explanation:
The average person doesn't make a distinction between taxes and fees,
accelerations or any of the other labels beloved by politicians of all parties
who would rather not appear to be raising taxes.

"It's all gotten to be a little too cute," Krinkie said. "When you get people
talking about a gas tax increase as a highway user fee, it's time to end the
endless debate."

Indeed, the linguistic gymnastics have attained joke status, with legislators
now routinely introducing revenue proposals as fees, no matter how far-fetched.

At a recent news conference, Rep. Jim Abeler, R-Anoka, smilingly said that a
"cigarette health enhancement fee" of $1 per pack might be used to fund his
health care initiatives. The proposed buck-a-pack cigarette tax increase has
been floating around for several years, but has been considered off the table
because of Pawlenty's resistance to state tax increases.

Sen. Dick Day, R-Owatonna, picked up the theme recently when asked if he thought
Pawlenty could support a special levy designed to tax the profit Vikings owner
Red McCombs might earn from selling the team.

"I guess we could call it some kind of a fee," Day deadpanned.

Political pressures

David Strom, president of the Taxpayers League, which advocates for smaller
government and lower taxes, maintains that the difference between taxes and fees
is more than rhetorical tap-dancing.

Taxes are imposed on the general population for services that benefit the
general public, he said. Fees are paid by those who voluntarily choose to
partake of a particular good or service.

If you don't want to hunt, you don't buy a hunting license and don't pay the
fee.

But that distinction has become blurred in recent years, as even Strom
acknowledges. "Fees can easily become disconnected from the delivery of
services," he said. "If we're looking at the substitution of billions of dollars
in fees for what would have been billions of dollars in taxes, then we're really
not rolling back big government. Have we crossed that line? I don't know."

Jim Mulder, executive director of the Association of Minnesota Counties, is not
as uncertain.

He cites the proposed Minnesota Water Legacy Act, which would impose a $36 fee
on homeowners as a "classic example." The fee would raise $80 million a year to
improve wastewater treatment. "That's a great thing, but it's a real distortion
of what you use fees for," he said. "It's not optional. You're not getting a
specific service for it. This is just the kind of thing you use taxes for. We're
going to wind up making people even more cynical about the system."

Strom said that some of the proposed fee charges, such as state-tribal casino
licensing fee and the doubled and tripled court fees of the last several years,
are questionable. "They really amount to 'we want more money, but we don't want
to raise taxes,' " he said. Still, Strom said, as with everything in government,
there are policy judgments and political judgments. House Republicans are under
"tremendous pressure" to fund school and nursing home increases this session, he
said.

"The governor needs those guys as allies, so obviously they're hunting around
for nickels and dimes," Strom said.

Unusual allies

Wayne Cox, executive director of Minnesota Citizens for Tax Justice, said that
to raise millions in fees and then chastise the other side for attempting to
raise millions in taxes is "intellectually dishonest."

Krinkie agrees, and says that is part of his motivation for a bill he
acknowledges is unlikely to pass.

His other motivation is to curb government spending. If fees are no longer an
option and tax increases remain unpalatable for the governor, he said, what has
been traditionally a high-tax, high-service state will have to learn simply to
get by on less.

Krinkie has some unusual allies in his fight to redefine the terms of the
debate. His ideological polar opposite, Rep. Tom Rukavina, DFL-Virginia, is a
co-sponsor, as are several other DFLers. Sen. Larry Pogemiller, DFL-Minneapolis,
said he too is tired of the interminable machinations on the subject.

At the heart of this is a more fundamental question, about which the allies in
the war of words probably do not agree: Does the state need more revenue, and
will the public support a tax increase to obtain it?

"Taxes are painful," Krinkie said. "Fees avoid the pain. Borrowing avoids the
pain. Revenues from casinos avoid the pain. Pain is the discipline that keeps
our spending in check.

"If some people around here want more revenue, fine, but no more sleight of
hand."

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Budget target highlights sharp partisan divide
Patricia Lopez, Star Tribune
April 14, 2005

House Republicans narrowly passed budget targets Thursday, presenting a two-part
plan that attempted to force DFLers to choose between profits from expanded
gambling and steeper budget cuts.

But all 66 DFLers voted against the plan that would rely on money from a
so-called racino, leaving the 68 Republicans to pass, on their own, the
resolution that ties higher spending on schools, health care and public safety
firmly to the $200 million projected to come from expanded gambling. Without
gambling money, the resolution requires the House to adhere to lower spending
targets that even Republicans said would be unpalatable.

Meanwhile, House Speaker Steve Sviggum, R-Kenyon, said that "within a few days"
there would be a "marriage" of the racino -- a proposed casino for Canterbury
Park racetrack -- and Gov. Tim Pawlenty's plan for a state-tribal casino.
Sviggum said he was not sure whether the two would be combined into one site or
simply linked in a single bill, but the two plans, he said, will be joined
together.

And support among his caucus, Sviggum predicted, "will not be soft," although he
acknowledged that several of his members have already told him they will not
vote for expanded gambling. If DFLers fail to provide the needed votes to pass
the plan, he said, "the Democrats will be responsible for cutting $200 million
from education and nursing homes."

DFLers rejected that argument, noting that Sviggum's party controls the House,
even if it is only by a two-vote margin.

DFLers are under no obligation to provide votes for a plan they believe relies
on illegal funds, said House Minority Leader Matt Entenza, DFL-St. Paul. State
Attorney General Mike Hatch, a DFLer, recently said in an opinion that
Pawlenty's state-tribal casino is unconstitutional on several grounds. "There
won't be any gambling money because it will be tied up in courts," Entenza said.

The resolution establishes two sets of spending targets for major areas of the
two-year budget the Legislature must pass this session. "Option B" relies on
gambling money to spend $134 million more than the governor would on K-12
schools, $2 million more on higher education, $70 million more on health care
and $4.5 million more on public safety.

"Option A" eliminates much of that additional spending. "We would prefer not to
do Option A," Sviggum said. DFLers, he noted, have not laid out plans that would
raise revenue to allow for all the spending they want.

Entenza said both options in the resolution are unacceptable.

Republicans, he said, "have signed their death warrant for being in the majority
because we don't think Minnesotans will stand for this kind of budget."