Finally, the budget ideas are coming into focus. Pawlenty has his revised budget, the Senate has floated a skeleton proposal, and some bits and pieces are coming out of the House Tax Committee.

Believe it or not, amidst all the sniping, there are some encouraging signs....with one big negative.

1) Education May Be a Winner. The Governor has staked out a solid position on protecting Education funding. This was a smart move on the Governor's part. He has been criticized for his education stances in the past, but this current proposal will silence those critics. It also one-ups the Senate idea of across the board cutting. I still think Sen. Pogemiller is running a feint on that idea and is working the angles to alleviate criticism for tax increases. I think the House is going to be siding with the Governor on this one and in the end, Education might actually get its proposed increase. One of those budget miracles, if you will.

2) Taxes Will Be on the Table. Although the Governor will be an enormous obstacle, the House and Senate leadership seem to be slowly preparing us for some type of tax increase. The House has a back door type increase by eliminating some deductions. The Senate is still being coy but I would guess they are talking about an increased tax on upper income. I don't see much talk about an overall tax reform plan....but if the Governor as the "immovable object" continues to butt heads with the Legislature as the "irresistable force", a tax overhaul may end up as the only compromise position available.

3) Health Care Still Not Fully Addressed. Ironically, the ideas that could produce the most cost savings and help our business climate the most, center around Health Care Reform. Yet, the Governor wants to use a hatchet on current health spending and the Senate seems to be satisfied with trimming around the edges. The Minnesota Health Plan is still out there, just waiting to be the solution. We can't dump people off state plans in this economy, it is just not right...it is just not moral. Either find the money to keep these programs in place or move to a bold reform. I don't see much progress in this area until we think a heckuva lot bigger.

These issues are going to be major points of contention. We have a big problem and even bigger egos involved here. As I look at the looming confrontations, I was encouraged to see that Sen. Ann Rest has taken some initiative on taxes.

If the general summation that Lori Sturdevant pointed out a few days ago is correct, this plan could be a crucial potential compromise and I hope it is being taken seriously at the Capitol.

Her bill addresses a number of things I have been talking about on this blog, plus some great new ideas. The pieces look like a workable plan to me. To review her main points;

A. Extend the sales tax on clothing, while rebating the tax for low income Minnesotans and reducing the total sales tax rate by at least half a percentage point. (This idea addresses the regressive problems of taxing clothing and reduces the total sales tax which will make it more palatable to the general public.)

B. Apply the sales tax to legal and accounting services, beginning in 2011. (I think taxing services should go even farther -- any service transaction should be subject to tax. Keep it simple.)

C. Eliminate the state corporate income tax in four years and give businesses an upfront sales tax exemption on capital purchases. (This should appeal to conservatives worried about business climate. I am not sure it will really make a big difference in this economy, but going forward it will be some incentive. Cutting taxes in conjunction with other tax increases makes more sense in a budget deficit.)

D. Boost the state business property tax beginning in 2010. (I am uncertain as to what the advantage will be here. Property values are spiraling downward and increasing the tax on what's left leaves some question. But Rep. Rest usually has good idea behind her proposals, so I'll trust her on this one.)

E. End the requirement that retailers pay their anticipated July sales tax receipts in June, thereby giving them a one-time shot of additional cash this year. (This is an accounting shift that wouldn't affect taxes in the long run. I assume the business community would approve however.)

F. Phase in a return of the state income tax rate to 1990s levels for filers earning more than $250,000 a year. (There it is... the big conservative objection. But if you want our budget to get back to some semblance of normalcy, this has to happen.)

Those are the main points of the Rest plan. My simple description of it? Brilliant.

I hope there is a serious discussion about this plan. It is the big idea that we have been searching for.