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On taxes, let’s recognize business arguments for what they are

Date Published: 06/13/2011

Author: Charlie Quimbly, Communications Fellow

On taxes, let's recognize business arguments for what they are

TC Daily Planet

For years, Growth & Justice has been looking for and failing to find strong evidence that Minnesota is losing jobs, wealthy residents and businesses due to corporate and personal income tax rates.

 

 

Just last month, the Council on State Taxation, an association made up largely of corporate tax attorneys, released a study [PDF] by Ernst and Young that says differences in tax rates are not a main factor influencing businesses to build or hire in one state over another — and that Minnesota ranks 10th best in terms of the competitiveness of our investment tax climate.

Despite this — and absent more than anecdotal evidence of business flight — political figures, business executives and their hired guns always come back with the same line: Higher state tax rates kill jobs and drive job creators and wealth out of Minnesota.

The latest version of this old story was offered Saturday by Ecolab CEO Doug Baker.

But you don't have to take my word for it. According to the U.S. Bureau of Labor statistics, Minnesota employment growth has lagged the U.S. rate for a decade. More than 1,200 small and medium-sized businesses left the state from 1997 to 2008.

There are a lot of factors that influence growth rates, but the 1,200 number was intriguing — because it was so specific and because the state of Minnesota has so little worried about business flight, it hasn't bothered to track such data. I checked the BLS and couldn't find the basis for his figure. I did find BLS figures for business "births" and "deaths" for those years.

During the period cited by Baker, 159,294 business establishments died in Minnesota and even more were created.

If we take Baker's word for his number, we might estimate that about 0.75% of the establishments that died actually moved out of state. And further, based on an estimate of about six jobs per establishment reflected in the BLS data, that Minnesota lost an average of eight jobs a month over the entire period because of business relocation.

Of course, no one can tie the 1,200 to taxes.

It's telling the appeal to data rests on this out-of-context number and a comparative jobs growth rate that slowed after we cut income tax rates.

However, this back and forth makes me realize that the facts don't really matter here. Businesspeople believe what they believe, and that belief will affect their decisions. In a free country they have the right and the power to make decisions that are not in the best interests of the state or its citizens.

It's not any businessperson's job to worry about non-shareholders or to lose sleep over laid-off employees. It's not their responsibility to propose balanced solutions to the budget shortfall or acknowledge the impact of a weaker state university system. It's not even, as we are constantly reminded, a wealthy person's obligation to pay more than they want to or to live in the place where they built their wealth if they are happier elsewhere.

Baker and the Minnesota Business Partnership do exert positive energy about Minnesota as a great place to do business. Some of their policy prescriptions, including early childhood education investment, dovetail with our own. We're fortunate as a state to have CEOs who dig in on big issues.

Minnesotans should not ignore CEOs and retired executives who offer answers to our budget problems. But neither should we let business arguments be the only consideration.


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