State economist affirms: Cuts cost more jobs than income tax increase

State Economist Tom Stinson estimates the spending cuts Gov. Tim Pawlenty will start making today will cost Minnesota 3,300 to 4,700 jobs.

By contrast, Stinson told the Legislative Advisory Commission on Tuesday, the $1 billion income tax increase that the Democratic-controlled Legislature passed and Pawlenty vetoed in May would have cost the state an estimated 1,000 jobs over the next two years.

— Pioneer Press

In May, Growth & Justice estimated potential state job losses from a proposed new 4^th tier personal income tax rate of 8.5 percent. Our study [PDF] — of a somewhat different tax proposal than the one ultimately passed by the Legislature — put the potential impact of the revenue-raising tax increase at 1,000 to 5,000 fewer jobs (out of about 2.7 million).

Yesterday, Minnesota's own state economist came up with a job loss number at the low end of the range Growth & Justice estimated.

We're gratified to see our work validated by Tom Stinson's estimate. (And let the record show, we so-called "tax-loving liberals" were even more conservative in our portrayal of the potential downside of raising more revenue.)

Stinson affirmed the other side of our case, too.

We declared that "any harm from higher taxes should be weighed against the potentially greater negative effects of spending reductions" and noted that the governor's proposed spending cuts could cost even more jobs in local governments and government service providers. 

Stinson's analysis of Gov. Pawlenty's unallotments puts some solid numbers behind that conclusion as well. In his estimation, the impact of the specific cuts could be three to five times greater than the impact from tax-increase-related measures.

It could be worse. His estimate reportedly did not include indirect job losses, such as when a private contractor loses state business and is forced to lay off employees.

Our assessment, though based on evidence, was still theoretical. Unfortunately for Minnesota, we about to gather more evidence about job loss — from unallotment, starting today.

— Charlie Quimby