[Winona Online Democracy]
Winona Online Democracy has been quite again for awhile.
Below are two articles from yesterday's Star Tribune. They address the tax cut myth. I think the articles show that while the phrase, "tax cut" is a feel-good slogan that gets some people elected, it's not a wise or fair way to actually govern. Talk about penny wise and pound foolish. I hope the conversation can shift from tax cuts to tax fairness. Can ways be found to lift the burden off of farmers and senior citizens on fixed incomes? Can the loop holes and massive cuts to the super rich be reversed? What do others think about the articles? Dwayne Voegeli Feb. 5, 2007 ============ Story # 1 February 04, 2007 Story URL: http://www.startribune.com/562/story/977780.html Dave Hage: The damage done The low-tax experiment has been a flop. It's time to try something new. By Dave Hage, Star Tribune Ten years ago, Minnesota embarked on an unplanned but historic experiment in state government. No, not the sort of social tinkering that once gave the state a reputation for Scandinavian paternalism. This was the opposite: a bet that lower taxes could give Minnesota a leaner, more competitive economy. Between 1997 and 2001, the Legislature passed five major tax cuts -- not just temporary rebates but permanent rate reductions that reduced the state's revenue stream by $1 billion annually and left state government, measured against the Minnesota economy, 10 percent smaller than it was in the mid-1990s. It wasn't long before local experts began to question the results. By 2004 Minnesota's economy had actually slowed down relative to the 1990s, and by 2005 the state's council of economic advisers noted that, for the first time in years, Minnesota's economy was underperforming the nation's. Now an outside study has put Minnesota in a national context and confirmed those doubts about the low-tax experiment. Two analysts at the Center on Budget and Policy Priorities in Washington identified 16 states that passed major tax cuts during the late 1990s, then studied their economic performance in the 2001-2006 recovery. The results? On key measures such as job creation and unemployment, virtually all of the 16 lagged behind the 34 states that didn't pass major tax cuts. Minnesota, though its economy picked up steam in 2006, still posted weaker job creation and income growth than the U.S. average over the five-year span. "There's just no evidence that moving to lower tax levels boosts your economic performance," says Nicholas Johnson, one of the study's authors. As the 2007 Legislature gets down to business, lawmakers should pay attention to these results. The DFL majority arrived in St. Paul with an ambitious agenda to improve the state's schools, roads and health care system, then quickly discovered it doesn't have the money to carry it out. Remember, the projected $2.2 billion budget surplus is largely one-time money; even Gov. Tim Pawlenty's budget shows that spending in major categories will go down again after 2009. Yet if legislators mention the dread phrase "tax increase," they're sure to be accused of wrecking the state economy. They shouldn't be buffaloed by that accusation, and they shouldn't let the state's needs be held hostage to what is now a discredited theory. Of course, the low-tax argument is intuitive and widely held. Low taxes cultivate a healthy business climate and leave more money in the hands of consumers, or so the theory goes. But what if the theory's wrong? Louisiana, Mississippi and West Virginia have been low-tax jurisdictions for decades -- yet they remain poor year after year. Massachusetts, Illinois and California have had high taxes for years -- yet they rank among the nation's most prosperous states. Taxes are only half the picture. "Remember that states have to balance their budgets," Johnson points out. "If they cut taxes they have to cut public services, and often these are services that business values, such as schools, transportation and higher education." It should be said that Johnson's think tank is known for its liberal politics. But many other researchers have reached the same conclusion. "While a low tax rate can be important, other things such as investment in education and health care also matter for the long run," says James Nguyen of the Corporation for Enterprise Development, a business-sponsored research group that publishes a respected annual report card on the states. Minnesota routinely wound up on the group's "honor roll," even during its high-tax years. This is precisely where Minnesota has paid a high price for the low-tax experiment. One reason Minnesota produced a surplus last year is simple austerity: General fund outlays are actually lower today than they were seven years ago, when adjusted for population growth and inflation. State aid to the public schools, adjusted for inflation, has gone down four years in a row. Thousands of families have lost eligibility for subsidized health insurance, and major transportation projects have been put on hold indefinitely. Reversing those trends -- restoring the fine public services and high quality of life that Minnesotans once took for granted -- will require more money and higher taxes. Proposing a tax increase might not be a hit with voters. But who knows? It might be a pro-growth strategy. Dave Hage . [EMAIL PROTECTED] ©2007 Star Tribune. All rights reserved. ================ Story # 2 Story URL: http://www.startribune.com/562/story/977774.html February 04, 2007 John Foley: If the state were run like a business, we'd insist on results John Foley As a parent, business owner and lifelong Minnesotan, I have been the beneficiary of an unsurpassed quality of life. I grew up in a safe neighborhood with good schools and economic opportunities to go as far as my dreams would take me. Sadly, my children and yours aren't as lucky. In the spirit of no new taxes, Gov. Tim Pawlenty and the Legislature have consistently reduced investments in the future. As a result, we have begun to see an erosion in our standard of living and ability to compete. Our schools are suffering, the health care system is overburdened, the elderly are being financially squeezed, our neighborhoods are less safe and our roads are clogged. In other words, the quality of life in Minnesota is beginning to crumble, and our children will bear the brunt. The governor's new spending proposals are a step in the right direction but do not go far enough. After years of cost-cutting and no new investments, a one-time spending increase will not get us back to a leadership position. If Minnesota were run like a competitive business, we would insist on a clear vision, achievable objectives and measurable results. One of the most common practices in business is for CEOs to come into a company and immediately start cutting costs. They know this is the fastest way to increase shareholder value and make themselves look effective -- but it rarely lasts. Cost-cutting is not a sustainable business strategy. That's one reason the average tenure for a CEO today is three to five years. The governor and Legislature should also be held accountable for delivering a sustainable vision for Minnesota. Consistent investment in good times and bad is the hallmark of strong, competitive companies. How did the whole argument get boiled down to no new taxes? While I don't like paying taxes, I understand that we have an obligation to support our way of life. What makes Minnesota competitive is that we have consistently invested in increasing our standard of living and quality of life. In the new global economy, companies such as 3M and Medtronic understand that they must offer world-class products and services to compete. They also understand that they need a highly trained and educated workforce to create those products and services. Without a world-class education, transportation and health care system to support our business community, these employers will be forced to look elsewhere. Why not tap into the talents of our business, health care and education leaders to take on these challenges with innovative and fresh ideas? "Good enough" cannot be the standard in a global economy. Minnesota has a long history of nurturing homegrown businesses, including 3M, Medtronic, Best Buy, Target, Mayo Clinic, General Mills, Andersen Windows and many more. These companies have thrived in Minnesota because we have offered educational, economic and quality-of-life opportunities to attract and retain the best and brightest. It's not by accident that we've been blessed with an abundance of entrepreneurs and visionaries. Minnesota has always prided itself on producing responsible philanthropic leaders and a close-knit business community. The political debate must turn away from portraying taxes as government waste. Instead we must ask ourselves and our leaders: Do we have a sustainable vision for our future? Will our children enjoy the same economic and quality-of-life opportunities we had? Today, the answer to these questions is uncertain. It's time to stop acting out of short-term self-interest and start building a better tomorrow. John Foley is the author of "Balanced Brand" and CEO of Level, a brand and reputation firm in Minneapolis. ©2007 Star Tribune. All rights reserved.
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