Research group recommends against new tax incentives for businesses

More on the Governor’s tax reform commission! Remember the commission asked for public comments on how to improve Minnesota’s business competitiveness? The Minnesota Budget Project, Growth & Justice, and others have had the opportunity to testify before the commission. Now the Institute on Taxation and Economic Policy (ITEP), a national nonprofit tax research group, has sent its own comments to the commission. A couple of quotes from the ITEP public comments:

  • State and local taxes are a very small part of the cost of doing business. If you add up all state and local taxes paid by businesses, they account for only 0.8 percent of business costs.
  • Reducing minor state and local taxes through rate cuts or more tax credits isn’t likely to impact a
    corporation’s decision to locate in a state. For example, long-time business leader and New York
    City Major Michael Bloomberg told the New York Times that “any company that makes a decision
    as to where they are going to be based on the tax rate is a company that won’t be around very long. If you’re down to that incremental margin you don’t have a business.”

Coincidently, Art Rolnick, Senior Vice President and Director of Research for the Federal Reserve Bank of Minneapolis, recently testified to the commission that tax incentives for particular businesses should be avoided: “Even though tax incentives look good from a parochial point of view, having an economic bidding war – playing cities and states off against each other – that’s counterproductive.”

Finally, check out ITEP’s blog called Talking Taxes, which is a great way to learn about what’s going on in other states when it comes to state and local tax proposals.

-Katherine Blauvelt

About Katherine Blauvelt

Katherine Blauvelt served as the Minnesota Budget Project’s policy analyst from 2007 to 2009.
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