Corporate tax cuts dressed in a blue collar


This week, conservatives in state legislature are rolling out tax cuts disguised as jobs bills. As Minnesota 2020′s Fiscal Policy Fellow Jeff Van Wychen tells us, we’ve been living though this policy the last eight years with little payback for the average worker.

Minnesota has cut real per capita own-source revenue (taxes, special assessments, fees, and other state and local revenue, excluding  federal aid) more than any other state in the nation from 2002 to 2008, more than $400 per capita in constant 2008 dollars.  Here are the results:

  • Minnesota ranks 32nd in percentage growth in employment (Jan. 2002 to Nov. 2010)
  • Minnesota ranks 36th in the percentage growth in per capita personal income (2002 to 2009)
  • Minnesota ranks 42nd in the percentage growth in median household income (2002 to 2009)

In short, eight years of the “no new tax” agenda has corresponded with economic deterioration in Minnesota both in an absolute sense and relative to other states.

When it comes to conservative corporate tax cuts, here is another set of facts to consider:

  • Businesses are already sitting on tons of capital; they are not expanding and creating jobs because aggregate demand is low–i.e., people cannot afford to purchase the goods and services that businesses are producing.
  • Businesses are not going to expand until there is demand for the things they are providing; that’s why the best way to promote recovery is not by giving more untargeted tax cuts to business, but by increasing the disposable income of low- and moderate-income households.

We can put more money back in middle- and lower-income pockets by moving toward a fairer tax system, one that reduces dependence on regressive property taxes and raises more progressive forms of revenue. Despite conservative policy dogma, concentrating more wealth into fewer hands doesn’t move Minnesota forward and doesn’t create prosperity.