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Guest Editorial: Dayton targets revenue but not costs

True, expecting a full "Team of Rivals" never was realistic.

Minnesota Gov. Mark Dayton has to govern, and doing so in the modern media spotlight would be impossible if members of his Cabinet challenged him at every turn.

No wonder so few of today's chief executives follow Lincoln's model, which was made famous by Doris Kearns Goodwin's 2005 biography and involved the president "gathering a most improbable assemblage of adversaries to serve in his Cabinet," as one critic describes.

But how about a "Team of Rival"?

How about bringing just one fiscal conservative aboard?

If Dayton had done that early on, he might have avoided his budget and tax plan's biggest mistake: its silence on the nonrevenue side of Minnesota's budget -- namely, costs.

The governor and his team have crafted a solid budget and a thoughtful proposal for tax reform, one that equalizes the lengths of the three legs of the state's revenue stool.

But the plan says little or nothing about the state government's costs. And that's a shame, because controlling costs would win businesses' and taxpayers' support while minimizing the economic harm that the tax hikes will cause.

Over the past decade or so, the property tax leg of Minnesota's revenue stool grew in relation to the income tax and sales tax legs, the state's tax commissioner says. Raising income taxes on the richest Minnesotans, extending the sales tax to many services and sending homeowners a property-tax rebate would bring the stool back into balance.

But Minnesota's economy is not only less dominant in the upper Midwest but also more of an outlier than it used to be. That's true on both the revenue and cost sides -- and reform-minded lawmakers in St. Paul should take notice.

On the revenue side, just as Minnesota is thinking about extending its sales tax to services and some clothing, North Dakota is thinking of dropping its own sales tax on clothes.

North Dakota also has income and property tax reforms on the table. The net result is sure to be lower taxes; and that change will magnify North Dakota's cost differential with Minnesota, especially once Dayton's proposed tax increases come on line.

South Dakota, of course, has had a tax advantage over Minnesota for years. If North Dakota starts enjoying one, too, then Minnesota's economy surely will feel a magnified effect.

But North Dakota enjoys a cost advantage as well. As a right-to-work state, North Dakota tends to pay less for its teachers, police officers and other government workers than Minnesota does.

In effect, that means North Dakota taxpayers get more bang for their buck.

And thanks to Gov. Scott Walker's reforms, labor costs in Wisconsin also are on their way down, at least in comparison with Minnesota.

That leaves Minnesota standing alone. Count on Republicans to highlight that isolation at election time -- and while the GOP in Minnesota may be down, it certainly is not out.

Democratic leaders in the Legislature should see this coming and add pension and civil service reforms to Dayton's package. That's the way to retain businesses, streamline state government and deliver Minnesota's respected services at a high level that can be sustained. -- Tom Dennis for the Grand Forks Herald