Last Friday, Nan and I had the opportunity to testify before Governor Pawlenty’s 21st Century Tax Reform Commission (along with Dane Smith from Growth & Justice). I think the three of us brought a fresh perspective to the commission.
My comments focused on the bigger picture – what are businesses taxes paying for? Well, to make Minnesota a good place to do business now and in the future. And that requires a sound infrastructure and a trained workforce.
Education – at all levels – is one of the most important keys to our success. The composition of our workforce is changing quickly. To stay economically competitive in the future, we need everyone to be well-educated (and diversely educated). But if we keep facing state budget deficits – we will continue to erode funding for the services that reduce disparities, stabilize families and improve the quality of our workforce.
An important piece of our state budget is the corporate income tax. To give some perspective of the role it plays in our budget – the state expects to collect $969 million through the corporate income tax in FY 2009. Compare that amount to last session’s budget deficit – $935 million for FY 2009. Corporate taxes are a slice of the pie we need to keep our budget whole.
Some claim that high taxes drive away businesses. I have two responses.
First, the evidence is everywhere that we are entering a new economy. In the future, perhaps the best way to make our state attractive to businesses is to first make our state attractive to the workers they will need. Having a large, well-educated supply of labor would be a crucial part of enticing business to come or stay in Minnesota. An “if you train them, they will come” philosophy.
Second, we should be strategic about the kind of businesses we want to attract. Any reform package will have winners and losers. If we are reforming our businesses taxes, I’d recommend attracting the kind of high-quality businesses we have today – which require strong public investments in our infrastructure and human capital.
As the commission puts together its final report in the next two months, I hope they take a step back and articulate how their recommendations fit into a larger vision for the state. A vision that takes advantage of the changes in the world economy, instead of allowing us to be overwhelmed by them. Perhaps we can see taxes as something constructive, instead of simply an obstacle.