Friday, July 20, 2007

But see? They didn't flinch 

Thanks for the interest in today's discussion of the civic center proposal. I read the report last night and one thing that I came away with was the neverending argument "we have to have this tax money to keep up." I called it "mutually assured taxation" on the air. (Check out the argument on this brochure for the new arena in Duluth -- it'll only add six cents to your $8 lunch.)

These things are a little tricky here in Minnesota. The money for the expansion would come from the food and beverage tax in St. Cloud. The tax was originally passed to pay for local civic buildings; at one time it paid for the civic center we now have. The money has more recently been used to pay for renovations in our arts district and at the local sports facility. Those bonds will soon be paid off. Rather than retire that tax, the move is now to find something else for it to pay for; thus comes the group supporting the new civic center expansion. The civic center proposal needs a state bond to make it happen, and so it needs state permission.

I will say, I don't really find the idea of an expansion egregious; the downtown area is about to lose its library and with restaurants closing all around the place, downtown is looking pretty shabby. We've spent money on worse. But that's the problem, isn't it? Rather than give us a tax break by letting us eat out for a half-buck less (on a $50 tab), it's easier to keep the tax in place and find some use, any use, for the bucks.

A similar attitude keeps showing up in this argument that we can tax the well-to-do more. Today's example from mnpACT! about a meeting in Red Wing where the local Chamber of Commerce gave its legislators some grief for supporting tax increases.
It would be a little difficult to satisfy this group on tax policy. After all, if wealthier citizens are looking for greener pastures, there are plenty of them. New Hampshire, Florida, Nevada, and Wyoming have no income tax at all... Alaska gives its citizens rebates on oil revenues. Oregon, Montana, and Delaware have no sales tax. But, with the exception of Stanley Hubbard who left for warmer climes in Florida, most of Minnesota's "elite" have stayed.

Why? Because the overall business climate is good here. Although Minnesota ranks high in tax revenue raised, Forbes magazine (not exactly a liberal source) decided to study all aspects of business climate...setting up a ranking of The Best States for Business (September, 2006). The result? Minnesota ranks 14th in the nation overall. That's ahead of Iowa (25th), Wisconsin (39th), South Dakota (17th) and just behind North Dakota (13th). Minnesota was ranked 14th for our labor force, 20th for regulatory environment, and most importantly, Forbes ranked Minnesota #3 for quality of life.

Before the chamber starts counting the number of wealthy Minnesotans who would bail out on Minnesota because of taxes, they might want to look at the Forbes is not measured by taxes alone.
The old Colbert quote of public finance being how to pluck the goose the most with the least amount of hissing has become how to pluck the goose the most without having the goose fly away. The OECD notes that at the time, Jean-Baptiste Colbert was interested in getting feathers for the wars and friends of Louis XIV. How different from now, if we replace the Sun King with Pogemiller, Clark and Bakk? Not much.

No doubt Minnesota is a great place to live. (Played golf today -- which is why I'm only posting now -- and 80 degrees and enough sun to keep the bugs off made this by far the nicest day of the year so far.) And those who are here are those who have voted with the feet; they adjust to Minnesota's higher taxes by receiving compensating differentials in other areas, including the weather (!), good roads, good schools, etc. The beauty of the St. Cloud civic center proposal is its hidden nature: You won't notice the money you forgo because you never held it. Thus there will be little objection to the bonding request St. Cloud will make. But small changes in what you keep can have some substantial effects. It's an elasticity question; seems like most of the good questions are.

One of the people I golfed with today is a local lawyer who handles estates. What keeps him busy these days? Writing opinions for clients on the benefits and costs of moving. Be careful you don't keep ignoring the hissing; those geese have maps as well as wings.

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