Tuesday, October 27, 2009

A short note to Growth and Justice 

Dear Dane,

Just read your note on less government not helping Minnesota. You use a ratio of government spending to personal income. Two things: One, we know state tax receipts are highly cyclical. That's what those tax commissions were telling you last year, if you had paid attention to it. Here's the Legislative panel:
While short-term cyclical volatility in Minnesota�s general fund tax base appears to increase during periods of economic downturn and typically parallels a significant disturbance or shock, long-term trend volatility in the tax base is roughly 30 percent greater today than it was during the 1970s. Most of this increase has noticeably occurred since the late 1990s.
So when the national economy turns downward, that ratio is going to fall. You can't blame that on policy. Where has G&J been in the debate to reduce cyclicality of tax receipts? I doubt you would support putting a sales tax on food; I know I wouldn't, even if it did reduce cyclicality.

There have not been chronic budget crises. There have been two shortfalls due to our reliance heavily on tax bases that are volatile.

Second, what was the growth of personal income in Minnesota 2006-08? 9.2% How about for the U.S.? 8.6%. Wisconsin? 7.0%. South Dakota? 16.6%. Where is this underperformance you were speaking of? Which state would you like me to emulate?

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