Wednesday, November 14, 2007

Job Creation

"State loses jobs for 4th-straight month"
Pioneer Press headline - November 14, 2007
Yes indeed, that was today's headline on the front page of my local newspaper's business section. The state government's job report for Minnesota's economy shows that our, "year-over-year job growth rate was just 0.1 percent last month, compared with 1.2 percent for the nation."
So if you are a student ready to graduate at the end of this semester or Spring Semester 2008 this is not very good news and even worse for the state's taxpayers since you state university graduates are very likely to take your newly-minted, taxpayer subsidized college degrees out of state in search of employment. Even worse from a macro-economic standpoint is that if Minnesota has essentially zero job growth then it makes it nearly impossible for us to recover from the terrible housing market we have here currently. Who the hell is going to buy a bigger home or a first home when job prospects are this poor?
Enough of the gloom - let's think big with a tax revolution for Minnesota. Something completely out of character for the state is needed so here is a proposal that I have NOT run through any econometric modeling nor focus groups of voters so there may be some flaws I have not addressed below but it is a starting point for reform:
First -- instead of debating increases to make our state personal income tax rate the highest in the nation at 9.7 percent like legislators did during the 2007 session the legislature should cast a vote to eliminate ALL personal income taxes.
Second -- personally I don't want some "revenue neutral" solution that would replace the "lost money" the state would see via the elimination of income taxes but people that think like me do not have a majority in our legislature. So let me be "pragmatic" by suggesting that the revenue loss from the elimination of personal income taxes be offset by an increase in our state sales tax rate only equal to this revenue differential.
Third -- yes I know the old line, "but, but sales taxes are regressive and hurt the poor......................" Enough of that already -- set aside the class warfare rhetoric to think in terms of the economic activity that would be caused by the elimination of all income taxes in Minnesota. Those evil, greedy rich people would probably buy automobiles (think of the Ford Motor plant being closed in St. Paul due to poor sales), boats, and second homes in small towns that have negative economic growth rates today. Yes the rich (and the middle class since they also pay income taxes) would have greater disposable income to actually purchase things which help the state's poorer economic classes improve their job prospects thus offsetting the increase state sales tax rate.
Fourth -- such a proposal beats the "tinkering around the edges" thinking that currently dominates our state legislature and would place Minnesota in the small fraternity of states that have zero personal income taxes.
But sadly the central planners in the legislature do not want us taxpayers to keep more money in our pockets because we would probably make crazy spending decisions such as choosing to send our children to private schools by paying the requisite tuition with our income tax refunds versus sending our children to the public school system or even worse - taxpayers might be able to save more money for retirement in personal retirement accounts instead of having to rely on the Social Security "safety net" that the government has tried to convince us will exist when we retire.
Revolution not rhetoric,

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