Minnesota Revenue Commissioner Myron Frans and his boss, Gov. Mark Dayton will unveil their plan for overhauling the state’s tax system on Tuesday, Jan. 22. It is expected to include tax increases to help eliminate the $1.1 billion shortfall and add funds to education and other programs the governor deems essential.
While Frans wouldn’t reveal what’s in the tax plan during an interview last week, he cautioned against assuming that everyone would be asked to pay more taxes. He spent last summer and fall laying the groundwork for what may be the most extensive revision of the state’s tax code in a generation.
Frans conducted 162 “tax reform” meetings in more than 50 cities. More than 7,000 Minnesotans, including 84 legislators, attended those gatherings. Dayton was impressed.
“To get over 100 people in a small town in Greater Minnesota to show up for an evening to talk about state tax policy, that’s really extraordinary,” he said. “I don’t know of any commissioner in my memory in any administration that has taken the kind of initiative that he has.”
Frans wasn’t selling a tax plan. The former tax lawyer was making a case for scrapping the current system and replacing it with one that is simpler, fairer and up to date. Citing eight budget deficits in 10 years, he asserted state government also needs more stable revenue sources.
His favorite props were a pair of three-legged stools that represent the income, sales and property taxes on which the state relies. Ten years ago, the legs were roughly equal, and the stool balanced. Now, the property tax leg generates 40 percent of state and local government revenue, the sales tax leg has shrunk to 27 percent, and the stool won’t stand.
The property tax has grown 80 percent over the last decade, while sales taxes are bringing in a declining share of revenue, even though Minnesota has the highest sales tax rate — 6.875 percent — in the Upper Midwest. That’s largely because many goods and most services are exempt from the tax.
“If we don’t do something about the sales tax leg of the stool, it’s going to remain a problem,” Frans said. Taxpayers who attended the meetings were “all over the board” on tax changes, he said, but “the one consistent theme was ‘Please fix these problems.'”
Dayton said he and Frans collaborated on his plan. “I gave him a general sense of where I want to go, but he’s the one who’s really hammered it out,” the governor said.
Frans, 62, has taken an unusual path to becoming the state’s leading tax architect. One of six children, he spent his early years on his family’s farm near Newton, Kan. When he was 5 years old, his father became a police officer, and Frans grew up in the small towns of Peabody and Marion, Kan.
In high school, he lettered in five sports, got his pilot’s license and was elected student council president. “That was the pinnacle of my political career,” he said.
After high school, he earned a bachelor’s degree in sociology at Washburn University in Topeka, Kan., in 1972, and then worked as a probation and parole officer for three years before enrolling at Sam Houston State University in Huntsville, Texas, where he got a master’s degree in criminology.
He taught at colleges in West Virginia and Michigan for two years, and then returned to his home state to attend the University of Kansas Law School. He intended to pursue a criminal justice career but became intrigued by tax law. When he graduated in 1983, he began his tax practice at the Miller and Chevalier law firm in Washington, D.C., which represented large national and international corporations. There he focused on research and never saw clients.
Eager for direct contact with clients, he shopped around for a “good-sized city” with enough Fortune 500 companies to support a tax practice and landed a job at Gray Plant Mooty Mooty & Bennett in Minneapolis in 1985. He stayed there for 14 years, and then joined the Faegre & Benson firm, also in Minneapolis, for 10 years.
Frans was considered a “tax guru” in the legal community, said former law partner Rich Forschler. But he wasn’t a “green-eye-shade bookworm … What people don’t know is that he’s a very funny and fun-loving guy.”
He left his practice in 2009 to become president of Leeds Precision Instruments, a Golden Valley manufacturing company. He and his wife, Minneapolis City Attorney Susan Segal, have two sons, ages 16 and 26.
After Dayton was elected in 2010, his chief of staff, Tina Smith, took charge of recruiting cabinet members. When a transition team member suggested Frans to head the Revenue Department, Smith, a social acquaintance, said, “That’s a great idea, but he’ll never take it.” He was a successful lawyer and business executive who had no political experience and would have to take a pay cut to join the administration.
But Frans agreed to meet Dayton. “We just really connected,” he recalled. “At the end of the interview, I knew I really wanted the job.” Why? “I’ve always liked tax policy,” he said, “and I had kind of regretted not having worked on it in government.”
Frans’ biggest concern was his lack of political and governing experience, but Dayton said, “He took to it like a duck takes to water.”
He took over the Revenue Department in April 2011 and within months began wondering whether he had made a mistake. Dayton and the Republican House and Senate majorities had a huge clash over the state budget that shut down state government for 20 days in July, and Frans was in round-the-clock negotiations for several weeks.
“Myron was a very tough negotiator for the governor’s positions, but he was always fair,” said former House Taxes Committee Chair Greg Davids, R-Preston. “The 2011 tax bill was a good resolution.”
Last year, Frans was a key player in the legislative negotiations to fund a $975 million stadium for the Minnesota Vikings. The negotiators worked several 20- to 22-hour days to hammer out a deal.
“That was fun,” he said. “That was exciting stuff, to get it done.” Minnesota Management and Budget Commissioner Jim Schowalter, a lead negotiator in both the budget and stadium talks, said Frans was “a breath of fresh air” at the bargaining table.
Asked what distinguishes the revenue commissioner, Schowalter replied, “Energy, flat out. He’s always available, aware of what’s going on, very strong on content and incredibly capable of working with people, understanding where they’re coming from and communicating with them.”
He’ll need those skills to sell Dayton’s tax ideas to the Legislature, even though Democrats control both houses. Lenczewski, the House tax chair, and Senate Taxes Committee Chair Rod Skoe, DFL-Clearbrook, said they like Frans personally and have good working relationships with him. Both want to overhaul the state tax system, but they have their own ideas on how to do it.
Lenczewski predicted Frans would have a tough time selling tax changes to lawmakers. “Legislators in both parties didn’t run on tax reform. We ran on getting rid of the structural (budget) deficits,” she said. “We can fix that without tax reform.”
Sen. Julianne Ortman of Chanhassen, the lead Republican on the Taxes Committee, predicted Dayton will propose massive tax increase, which Republicans will oppose. She wishes Frans would do more to suppress the governor’s appetite for taxes.
“He’s a very likeable, friendly person,” she said of the commissioner, “but I’d like to see him be a stronger advocate for taxpayers, the economy and good tax policy.”
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Copyright 2013 – Pioneer Press, St. Paul, Minn.
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Tags: IRS, State and Local Taxes
