Despite many years of running and growing a company as a bleeding-heart liberal, I can't ever remember getting up in the morning and saying: "Today, I'm going to go forth and create a new job!"
Now, maybe State Senator Geoff Michel (R - Edina) — a logical legislator who must've absorbed a few sound fiscal concepts as an aide to Gov. Arne Carlson — knows some people like that. But more likely here, his thinking is shaped by people who say high taxes prevent them from creating jobs, when they really mean they wish they made more money and cutting their tax rate is the easiest way they know how.
The idea that investment helps create jobs has some truth in it, and so does the notion that if investors can make more money by growing a company than by manipulating the stock market, they will do it. Long term, I might even agree with conservative economists on the main point.
But whether you are a state senator or President of the United States, you lose sight of the following truth at your peril. Investors are interested in making money, not creating jobs. And entrepreneurs are just a crazier version of investors. If they have to create jobs to realize their vision, they will do it. But if they could accomplish the same thing all by their lonesome, they would do that in a heartbeat.
So even though I don't automatically get palpitations when some politician proposes cutting corporate tax rates, I just shake my head when I see them claiming that cutting business taxes will "kick start the economy" and "grow jobs."
Still, when Sen. Michel (R - Edina) issued the tax-cut altar call this week — "Let's send a message today that Minnesota is open for business" — True North's Chief said Halleluiah:
Revenue can not possibly increase if businesses are cutting employees, shutting their doors and moving to Nevada, South Dakota and Texas.
True enough, but a big "if." And he failed to draw the connection between what anti-tax dogma says will happen and what is really going on.
A new analysis from the Center on Budget and Policy Priorities lays out why a corporate tax cut is unlikely to provide an economic stimulus any time soon:
“Increasing the after-tax income of businesses typically does not create an incentive for them to spend more on labor or to produce more, because production depends on the ability to sell output."
There's a fair amount of cutting and door shutting happening in the low-tax states the Chief cites, too. But we've been told they, along with Florida, have been absconding with Minnesota's business wealth. This is largely based on business tax state rankings ginned up by the Tax Foundation — not on actual studies that show an exodus is occurring. (Matt Kane offers a counter-view here.)
In fact, the indicators for those states are doing no better than Minnesota's.
Nevada leads the nation in foreclosures, followed by Florida, and ranked 45th (that's bad) in unemployment rate (Florida is 39th). Texas (27th) and Minnesota (25th) are about even on foreclosures; Minnesota's unemployment rate (31st) is 0.7 points higher than Texas's (19th). Fresh business bankruptcy data is not easily accessible, but Texas had been showing a much worse rate compared to ours.
South Dakota is the outlier, but as far as substantial Minnesota industry shutting down here and moving across the border to create jobs, Brad Pitt is more likely to start making babies with Kathy Bates.
— Charlie Quimby
Cross-posted in an edited version from Across the Great Divide