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Taxes could be fairer and better for business

Date Published: 05/01/2009

Author:

Taxes could be fairer and better for business

Star Tribune | December 12, 2004
By Lori Sturdevant

It's Year Four of singing "The Red Ink Blues" at the State Capitol. I don't know about you, but I'm ready for some new lyrics, or maybe a whole new tune.

Here's a thought: Let's suspend the fight over whether taxes are too high or not high enough in Minnesota, long enough to ask two different questions: Are state and local taxes fair? And are they arranged in a way that helps businesses start and grow here?

Call it a flight of tax policy fancy if you will. But I'd submit that if more Minnesotans thought their tax burden was fair, there'd be less grousing about paying. And if more businesses found the state and local tax climate attractive for growth, that growth would get the red out of the state budget.

It happens that this newspaper's former publisher Joel Kramer and the other good folks at Growth and Justice, Minnesota's newest public policy think tank, have been asking those very questions for the past few months. (They're still asking, and would gladly receive comments at www.growthandjustice.org.)

They are closing in on encouraging answers: Yes, it's possible for Minnesota's tax burden to be shared more equitably, falling as heavily on the rich as it does on the poor and middle class. And yes, it's possible for taxes to be fairer, and still arranged to be better for business.

To buy that, you might have to do something radical: Change your mind. Kramer's ideas challenge what he concedes are "cherished beliefs" within this state's conservative and liberal camps.

To wit: If you think that raising rich people's taxes is the last thing that a growth-seeking state would do, Growth and Justice asks you to look at the evidence. Research shows that states with progressive income taxes (higher rates on higher incomes) do quite well in the growth department. In fact, Minnesota has been one of them.

Then too, if you think that businesses should pay more so that average earners pay less, consider this: Businesses don't pay taxes. Their customers do, with higher prices, and their employees do, through lower wages. Research has found that business taxes are actually regressive. They fall disproportionately on low-income people.

In a nutshell, here's what Growth and Justice is kicking around:

What will Gov. No New Taxes say to all those moves? It turns out that they do not raise an additional dime of revenue for the state. Tim Pawlenty has always said that he is not opposed to shifting tax burdens around for good reason, as long as the end result is "revenue neutral." This would be.

The other objection Pawlenty and his allies in the business community will surely raise is about competitiveness. Minnesota has always relied more on income taxes than other states. This would make that sore thumb more prominent.

But Minnesota has never minded being exceptional on rankings of household income or school achievement or miles of paved highway or low incarceration rates -- and those are things that exceptional income tax buys.

Besides, the Growth and Justice scheme would produce some tax exceptionalism to brag about: No corporate income tax! No sales tax on business purchases! Tax breaks for paying decent wages! One of the best tax climates for business in the nation!

Surely that would be worth something to the stock portfolios of those who would be given the privilege of paying higher income taxes. That's not to mention the satisfaction they would have, living in a state that takes to heart the Gospel writer's dictum: "For unto whomsoever much is given, of him shall be much required."

Lori Sturdevant is a Star Tribune editorial writer and columnist. She is at lsturdevant@startribune.com.

 


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