Conserving resources and providing habitat for wildlife is good. So are state parks and the arts. I’d happily pay more taxes for Minnesota to increase spending in these areas. But amending the state constitution to dedicate a fixed proportion of state sales tax to these programs for a quarter-century is terrible public policy. The legislature should not pass this measure, nor should citizens ratify it.
The impulse to spend more on conservation is a good one. Adjusted for inflation, we are spending substantially less than in the past while urbanization and a growing population put increasing pressure on our natural resources.
Earmarking specific sales tax percentages for specific programs for fixed periods of time is bad public policy because it assumes knowledge of the future that simply does not exist. We don’t know what the need for conservation measures will be in 2015 or 2030. We don’t know what resources we will have. We don’t know what competing needs our state will face.
Enshrining specific streams of tax revenue in a state constitution binds the hands of future elected officials. It prevents them from allocating resources to the greatest benefit of Minnesota’s society.
That has happened again and again elsewhere. Highly laudable desires motivated Brazilians to write many such earmarks into their new constitution in 1988. But those requirements put subsequent governments into a fiscal straitjacket that has contributed to that country’s ongoing economic stagnation.
Some will retort that we already have a motor fuel tax dedicated to road construction. The public supports this tax. Others will note that most economists, including me, advocate specific taxes on pollution or on goods like alcohol and tobacco.
This is true, but the circumstances are different. Gas taxes are the best example of tying tax paid to benefits received. Taxes on pollution, alcohol or tobacco would be calibrated to offset the distinct external costs of pollution or other harmful activities. This is different than an a priori decision that 3/8 of one percent of taxable sales over a quarter century should go to conservation.
This amendment was prompted in part by the fiscal corner into which we have painted ourselves. We cut income-tax rates — not so much as to decrease revenues in absolute terms, but enough to reduce our flexibility to deal with new issues. We face ongoing increases in health-related spending such as Medicaid, MinnesotaCare and health benefits for public employees. Higher oil prices impose sharply higher heating costs on state facilities and raise the cost of road maintenance and construction.
All that puts pressure on most other spending categories, including conservation, parks and the arts. Frustration is understandable. But our state will be best off if we keep this and future legislatures free to make tough tradeoffs as they best can — without constitutional strictures that narrow their prudent choices.
© 2006 Edward Lotterman
Chanarambie Consulting, Inc.