Pawlenty recently bragged that Minnesota's overall tax ranking among
states has fallen. Such boasting is not surprising; the debate
over taxes invariably invokes comments from politicians like Pawlenty
about how taxes hurt the economy and stifle economic growth
Anti-tax politicians might concede that
government expenditures increase the quality of life, but to them,
taxes have by definition, a negative impact on a state's "business
climate". They argue that businesses and individuals migrate to
states with lower taxes, giving low tax states the economic growth.
As a result, a state will always be better off economically if it
If this prevailing wisdom is correct,
low tax states would have the strongest economies, and their
citizens, the highest after-tax incomes.
But the facts don't bear this out.
Look at the high tax states. Using 2002 and 2004 U.S. Census and
Department of Commerce data, New York state had the highest taxes per
capita. Yet New Yorkers had the sixth highest income per person,
taxes were paid.
New York is not an anomaly.
Contrary to the expectation, people in the high tax states aren't
suffering. This is noteworthy: All five of the highest tax states in
2002 were ranked among the top ten in per capita income even after
taxes are factored in. This is not what business leaders and certain
politicians want you to hear.
In contrast, residents in low tax
states don't do very well. Residents in none of the five lowest tax
states come even close to the national average of per capital income.
Four of the five lowest tax states actually rank in the bottom ten,
in after-tax income.
People in high tax states prosper
significantly more than people in low tax states -- the opposite of
what Pawlenty and other politicians suggest. Why? Is it just
chance? Or could it be that sometimes society can accomplish more --
and do so more efficiently -- by working together, than individuals
can do on their own.
Public investments in health care,
education, environment, transportation, and public safety provide the
healthy, well educated workers that enable businesses to thrive.
People and the businesses where they work, and in which they invest,
prosper when society makes those investments and addresses problems
such as crime and chemical dependency up front. All of this requires
an engaged citizenry, and yes, some taxes. But this may be the best
investment any community can make in its future.
The news of Minnesota's falling
tax ranking that Pawlenty touted, would be very welcome if it means
that Minnesota citizens will be more prosperous and have a better
quality of life. But when that change in tax ranking has occurred
because the the Pawlenty administration has made cuts in funding for
environment and natural resources, because they have been borrowing
money for road construction, and because health care is becoming less
affordable and college tuition has been skyrocketing, it is far from
an indication that Minnesota is becoming a more prosperous state.
For the Governor and certain
business leaders, the low taxes of Mississippi and Alabama might be a
model to emulate. But many Minnesotans have a vision of Minnesota
where we prosper because we have made wise choices; where we take
care of our environment, meet the health care needs of all families,
and are a leader in educational opportunity.
We can work to minimize taxes by
investing in prevention, by avoiding large corporate subsidies, and
by making government more efficient. But let's not be so eager to
celebrate lower taxes when they are taking away from the good things
that past Minnesota leaders have left for us.