U of M professor Ann Markusen has an op/ed about tax incentives to promote job creation in yesterday's Star Tribune. She lays out the arguments against incentives in some detail, says a majority of economic development scholars support incentives, and then proposes some state-level reforms.

A New York Times article suggests that America's religious, ethic and racial diversity may account for some of the nation's relative antipathy toward government spending. More homogeneous countries exhibit less resistance to spending for the common good.

In America, government spending on social transfers — everything from food stamps and unemployment insurance to health care and pensions — is about a third less than it is in Italy, France or Belgium, when expressed as a share of the economy, according to data from the Organization for Economic Cooperation and Development. And it is about half the level of Sweden’s. Moreover, Americans pay less in taxes than the citizens of nearly every other wealthy nation in the O.E.C.D.

Could this diversity argument apply even to Swede-influenced Minnesota? Has the last several decades' influx of Hispanics, African-Americans, Hmong, Somalis and other non-Anglo citizens influenced the claims that we are spending too much on public education and transportation, that government is wasteful and ineffective, and that personal responsibility is the solution to poverty and inadequate health care?

George Lakoff and Bruce Budner provide a counter to the position that the income tax subtracts from wealth. On the contrary, they say, taxation and spending on public services help increase it.

America's government has at least two fundamental functions, protection and empowerment. Protection includes the police, firefighters, emergency services, public health, the military, and so on. Empowerment includes the infrastructure needed for business and everyday life: roads, communications systems, water supplies, public education, the banking system for loans and economic stability, the SEC for the stock market, the courts for enforcing contracts, air traffic control, support for basic science, our national parks and public buildings, and more. We are usually aware of protection. But the empowerment infrastructure, provided by taxes, is usually taken for granted, hidden, or ignored. Yet it is absolutely crucial, a fundamental truth about America and why America provides opportunity.

[...]

While many progressives say it is only fair that those who earn more pay a higher percentage of their earnings as taxes compared to those who have difficulty making ends meet, conservatives respond by asserting that it is unfair to "punish" the financially successful by making them pay more.

An important point often lost in this debate is an appreciation that the common wealth, which our taxes create and sustain, empowers the wealthy in myriad ways to create their wealth. We call this compound empowerment -- the compounded use of the common wealth by corporations, their investors, and other wealthy individuals.

[...]

Ordinary people just drive on the highways; corporations send fleets of trucks. Ordinary people may get a bank loan for their mortgage; corporations borrow money to buy whole companies. Ordinary people rarely use the courts; most of the courts are used for corporate law and contract disputes. Corporations and their investors -- those who have accumulated enough money beyond basic needs so they can invest -- make much more use, compound use, of the empowering infrastructure provided by everybody's tax money.

The wealthy have made greater use of the common good -- they have been empowered by it in creating their wealth -- and thus they have a greater moral obligation to sustain it. They are merely paying their debt to society in arrears and investing in future empowerment.

Tax fairness in Minnesota is declining, says the Minnesota Budget Project. At the same time, most Minnesotans will face paying higher taxes, though not as much as a decade ago.

Both income trends and policy choices have contributed to the erosion of tax fairness. The Department of Revenue notes that much of the increase in regressivity can be traced to increased inequity in the distribution of wealth in the 1990s, in which the benefits of growth went disproportionately to those with the highest incomes.[5] But policy choices are also part of the picture, including a shift away from state taxes, which are more based on the taxpayer’s ability to pay, to regressive local taxes, especially property taxes. In 2002, local taxes made up 24.6% of total taxes, and this share rose to 25.8% in 2004 and is project to rise further to 28.5% in 2009. At the same time that local taxes are becoming a larger share of total taxes, local taxes are also becoming more regressive.

The Project's report only hints at another issue driving the costs of government toward the middle: Increasing fees. It mentions the governor's Health Impact Fee (tobacco tax), but not other fees and tuition increases. State and local taxes only cover about 2/3rds of what we ultimately pay for government services. The other third comes from fees and other non-tax sources, plus money from the federal government that flows back to the state and local governments.

We hear this sort of conservative tax critique based on anecdotal "evidence" that businesses are leaving the state. A factual response to this canard can rapidly get too wonky for most voters. That's why the anti-tax crowd can get away with it. The best response to these claims is, "Oh yeah? Prove it."

Here are some of the reasons you should be very, very skeptical about such claims.

Business relocation is a poor measure of state business climate.

A study on job loss resulting from California businesses fleeing the state found "the shift of employment of California-headquartered companies to other states has been offset by increased employment in the state by firms headquartered elsewhere, with the result that California’s share of national employment has remained roughly constant."

It found that physical business relocation contributed trivially to changes in employment numbers or lost earnings, and that business relocation in the state did not change much over the past decade or so. On the other hand, decisions to expand or start a business may be more strongly influenced by marginal state-to-state differences that affect profitability.

Relocation is a less likely response to increased taxes.

A Texas study looked at the business climate for the state's technology industries. The study noted distinct differences in the ways companies responded to a theoretical major tax increase of 50 percent or more.

In general companies would respond to a major increase in this sequence:

1. Raise prices
2. Decrease other costs and decrease employment
3. Move some property out of Texas
4. Move entirely out of Texas

However, small technology companies were more likely to raise prices and less likely to move property or decrease employment than larger companies. Larger companies, especially those competing internationally, were more likely to decrease employment than raise prices.

Taxes are only one factor in decisions about location.

Taxes are only one factor is a business's decision to start, expand, relocate or fold. Since moves are expensive and political and economic changes can always lead to shifts in tax policy, the benefits of lower business taxes in another state can be erased relatively easily. Lower state taxes are typically accompanied by lower state expenditures for education, infrastructure and highways, and public health. These matter at least as much in determining an area's economic health and suitability for business growth.

The Loyalty Effect. The Texas report found that "firms started in Texas are less sensitive to variations in taxation" and a "clear majority of technology firms did not choose the state because it represented the best tax option and for these companies economic factors diminish in relation to state loyalty." This loyalty effect could be related to family roots of the founders, but also to a more nuanced appreciation for cultural and quality of life considerations. Cost, skills and availability of labor. The education system and openness to immigration (both from other states and nations) should have a positive effect on business location. So, conservatives would say, do lower labor costs, right to work laws and lower workers comp rates.

The Clustering Effect. States that have a solid infrastructure, educated workforce, access to university research and a history of business innovation are more likely to attract similar businesses. Businesses look for suppliers, customers, and peer companies that can be source of ideas, support and potential talent. States can try to attract such businesses by lowering taxes and regulation or declaring their ambition to become the Silicon Valley of Switchgrass, but in fact this type of transformation is very difficult to achieve without substantial investment — and an already established base of businesses in a related field.

For evidence, look at how the so-called pro-business states actually rank as locations for major business headquarters. Those with supposedly attractive business climates are not exactly powerhouses. You might argue many of the "top" 12 have dressed themselves up with gimmicks and incentives to attract businesses, because fundamentally they have severe deficits.

Ranking of Top "Pro-Business" States source: Pollina Corporate Top Business States (with number of Fortune 1000 Companies headquartered in the state)

1. Virginia —30
2. South Carolina —4
3. Florida —31
4. North Carolina —25
5. Utah —5
6. Wyoming —0
7. South Dakota —0
8. Alabama —8
9. Georgia —31
10. Nebraska —8
11. Idaho —3
12. Nevada —8

Minnesota, which ranked 39th, has 36 Fortune 1000 headquarters — more than any state in the top 20. The author of the previous year's Pollina survey also remarked in his report: "Today, if a job is relocated out of a state, it is more likely to be moved offshore than to another state."

Two strategic tax questions drive the proposals: How much? And how fair?

Looking first at fairness: The House leadership wants to reduce property taxes and pay for the reduction by raising individual income tax rates on a small sliver of the highest-earning Minnesotans: those with earnings after deductions of $400,000 for married couples or $226,000 for individuals without dependent children. Less than 1 percent of Minnesotans would be affected, and they are currently paying a smaller share of their income in total state and local taxes than middle-class Minnesotans pay.

So this would be a very positive step for fairness, which has suffered in recent years as local governments and school districts raised property taxes to compensate for reduced help from the state. Property taxes proportionally affect lower and middle earners more than they affect the wealthy.

But making the tax system fairer does not make it adequate to meet the expectations Minnesotans have for our state -- our widely shared commitment to a high quality of life, an economy that provides a decent standard of living to all working people, and a society that invests in our children so they can fulfill their potential.

To meet those expectations, we must also ask: How much public investment and government service are we willing to pay for?

Fortunately, we know how to measure how much state and local government we have. The "price of government" is all the revenue generated by state and local governments from taxes and fees, as a percentage of all Minnesotans' income. In the mid-'90s, that price of government number was about 17.5 percent. By 2003, after a lot of tax cutting, it had plummeted to 15.4 percent -- a decline of almost $4 billion a year. Last year, it was back up to 16.4 percent, thanks in large part to rising property taxes, fees, and public college tuition which disproportionately affect lower- and middle-income Minnesotans.

If we leave our tax and fee rates as they are -- what the conservatives are now calling "live within our means" because it sounds better than "no new taxes" -- then our price of government will decline over the next four years to 15.6 percent. That's about $2 billion a year less than today, and about $5 billion a year less than in the mid-1990s. That is not just "living within our means." It is diminishing our expectations to a level far below our means.

How much is enough? In theory, the question should be answered from the bottom up: Add up all the services and public investments people are willing to pay their government to provide. In practice, that's very hard, perhaps impossible, to do. But we do have a good guideline to how much government Minnesotans are willing to pay for. It turns out that even though most Minnesotans don't pay any attention to the measure called the price of government, they respond politically as if they were paying attention. When it reached 17.5 percent, pressure built to lower taxes. When it plummeted to 15.4 percent, pressure built to raise revenue.

Given the evidence that states that invest more in their people and places perform better economically, a good guideline would be 17 percent. A more modest guideline would be the average price of government since 1990, which is 16.6 percent.

Even that more modest 16.6 percent would require that we raise more than $600 million more revenue next year than our current system is projected to raise, and about $2.5 billion more in 2010 than we're now headed for.

Why is the price of government projected to decline? Because state revenues now are not projected to grow as fast as personal income -- i.e., the revenue system does not keep pace with economic growth.

The solution is simple. Adjust the revenue system so it does grow as fast as the economy. There are a number of ways to do this, but the most significant is to raise individual income taxes, because the income tax is the only major revenue source that grows faster than income. And raising the income tax more on high earners is even better, because high earners' incomes grow faster than average incomes.

If we use other revenue sources as well -- like a half-cent sales tax increase in the metro area to pay for transportation, or a statewide gas tax hike -- we should provide a fairness credit to low- and middle-income households based on their size, so that families struggling to make ends meet are not asked to pay more.

This solution has a triple-positive impact:

• It links our government size to our income, so that we "live within our means."

• It raises revenues needed to address many goals Minnesotans share, such as increasing opportunities for our children and reducing traffic congestion.

• And it makes the system fairer, by raising the share of taxes paid by the high earners, who currently pay less than their proportional share.

How much, and how fair? It's time to address both questions, head on.

What makes Minnesota competitive is that we have consistently invested in increasing our standard of living and quality of life.

Last week, the Minneapolis Star Tribune published an op/ed by Mitch Pearlstein (Test results add up to a good case for school vouchers). Here, Growth & Justice Research and Policy Director Angela Eilers responds.

StarTribune columnist Katherine Kersten focuses on potential tax increases in a column about early proposals before the Minnesota legislature ("DFL's addition to tax-and-spend retains its grip"). She starts by once again mischaracterizing the state's temporary budget surplus:

With a projected $2.2 billion state budget surplus, legislators could have funded champagne-style programs while avoiding the headache of higher taxes. Given the surplus, some hard-pressed Minnesota taxpayers were even dreaming of a rebate.

PRESIDENT BUSH wrote in a Wall Street Journal op-ed Wednesday that "it is also a fact that our tax cuts have fueled robust economic growth and record revenues." The claim about fueling record revenue is flat wrong, and it is shocking that the president should persist in making such errors. After all, tax cuts are the central plank of his domestic policy. How can he fail to understand the basic facts about them? This is not just our opinion. Harvard's N. Gregory Mankiw, an economic conservative who served as chairman of Mr. Bush's Council of Economic Advisers, has tested the hypothesis on which Mr. Bush's claim is based: He looked at the extent to which tax cuts stimulate extra growth and the extent to which that growth generates extra tax revenue that offsets the initial loss of revenue from the tax cut. Mr. Mankiw's conclusion: Even over the long term, once you've allowed all of the extra growth to feed through into extra revenue, cuts in capital taxes juice the economy enough to recoup half of the lost revenue, and cuts in income taxes deliver a boost that recoups 17 percent of the lost revenue. So a $100 billion cut in taxes on capital widens the budget deficit by $50 billion, and a $100 billion cut in income taxes widens the budget deficit by $83 billion. If Mr. Bush does not believe Mr. Mankiw, perhaps he may believe the Congressional Budget Office. In a period when it was run by Douglas Holtz-Eakin, another economic conservative who worked in Mr. Bush's White House, the CBO estimated the extent to which a 10 percent reduction in personal taxes might pay for itself. On the most optimistic assumptions it could muster, the CBO found that tax cuts would stimulate enough economic growth to replace 22 percent of lost revenue in the first five years and 32 percent in the second five. On pessimistic assumptions, the growth effects of tax cuts did nothing to offset revenue loss. If Mr. Bush believes neither Mr. Mankiw nor the Congressional Budget Office, he should at least respect his own Treasury. Prodded by the White House, Treasury economists have calculated how much extra growth would result from making the Bush tax cuts permanent. They have concluded that economic output would rise by about 0.5 percent in the first six years and by an additional 0.2 percent in the "long term." Since the federal government collects around 18 percent of gross domestic product in taxes, enlarging GDP by 0.7 percent would result in extra tax revenue equivalent to 0.13 percent of GDP. That would offset less than a tenth of the revenue that would be lost because of the tax cuts. Mr. Bush's op-ed included nice statements about bipartisan cooperation. But the Democrats would be more likely to cooperate with the president if he stopped making things up.

1. A concern for more effective government. The point is not size, but effectiveness. We should choose the solutions that most effectively accomplish our goals.
2. Select the right measures of effectiveness. Before we argue about tactics, let's be sure to agree on the strategic measures of success. For example, in health care, if we say we want everyone insured, then solutions will focus on how to mandate and pay for insurance. But if we agree that real underlying goal is healthy longevity, see how it broadens the discussion.
3. Agree on principles of fairness and fiscal transparency. Non-partisan agreement might be possible on these five principles:

• Changes in how we raise revenue should not make the system more regressive. We should not place a greater burden on middle and lower income earners than on high earners.
• Establish how much, as a percentage of income, we are willing to pay for government. We already have a widely accepted measure — the Price of Government — that could help us settle on the right level of services at the right price for Minnesota.
• Count inflation in budget projections.
• Build reserves during good times, so the state doesn't have to go through disruptive budget cuts when revenues don't meet expectations.
• Commit to measuring results and holding government accountable for achieving them.

A December 3rd Star Tribune column by Katherine Kersten, "Well-heeled Gang of 200 gets schooled in economic reality by Gov. Pawlenty," contains some misconceptions about the state budget and the relationship between lower taxes and revenue. Joel Kramer responds:

One in every 825 households earned at least $2 million last year, nearly double the percentage in 1989, adjusted for inflation, Mr. Wolff found in an analysis of government data. When it comes to wealth, one in every 325 households had a net worth of $10 million or more in 2004, the latest year for which data is available, more than four times as many as in 1989.

The Times data decribes the top 1/10th and 3/10ths of a percent, respectively, where income disparity has accelerated fastest. If wealth were growing at a similar rate at other income levels, who would be complaining?

But the gains from recent economic growth have been flowing disproportionately to the top. And lately, there's been less in the way of progressive tax policy to restrain the upward flow.

In an earlier Gilded Age, Andrew Carnegie argued that talented managers who accumulate great wealth were morally obligated to redistribute their wealth through philanthropy. The estate tax and the progressive income tax later took over most of that function — imposing tax rates of more than 70 percent as recently as 1980 on incomes above a certain level.

Now, with this marginal rate at half that much and the estate tax fading in importance, many of the new rich engage in the conspicuous consumption that their wealth allows. Others, while certainly not stinting on comfort, are embracing philanthropy as an alternative to a life of professional accomplishment.

[...]

As Bush administration officials see it — and conservative economists often agree — philanthropy is a better means of redistributing the nation’s wealth than higher taxes on the rich. They argue that higher marginal tax rates would discourage entrepreneurship and risk-taking. But some among the newly rich have misgivings.

Mark M. Zandi is one. He was a founder of Economy.com, a forecasting and data gathering service in West Chester, Pa. His net worth vaulted into eight figures with the company’s sale last year to Moody’s Investor Service.

“Our tax policies should be redesigned through the prism that wealth is being increasingly skewed,” Mr. Zandi said, arguing that higher taxes on the rich could help restore a sense of fairness to the system and blunt a backlash from a middle class that feels increasingly squeezed by the costs of health care, higher education, and a secure retirement.

[Warren] Buffett compiled a data sheet of the men and women who work in his office. He had each of them make a fraction; the numerator was how much they paid in federal income tax and in payroll taxes for Social Security and Medicare, and the denominator was their taxable income. The people in his office were mostly secretaries and clerks, though not all.

It turned out that Mr. Buffett, with immense income from dividends and capital gains, paid far, far less as a fraction of his income than the secretaries or the clerks or anyone else in his office. Further, in conversation it came up that Mr. Buffett doesn’t use any tax planning at all. He just pays as the Internal Revenue Code requires. “How can this be fair?” he asked of how little he pays relative to his employees. “How can this be right?”

Even though I agreed with him, I warned that whenever someone tried to raise the issue, he or she was accused of fomenting class warfare.

“There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”

Minnesota's high ranking as a healthy state is in danger of slipping. In particular, we have a pipeline problem in the form of reduced prenatal care, early screening for poor children, and increasing childhood obesity.

Some of the contributing factors are described in "Can we close the coverage gap?", Minnesota Physician magazine (Sept. 2006). Here's a summary of points from the studies, "The Coverage Gap" and "Health Insurance Coverage in Minnesota," reported by the MP magazine authors.

While Minnesota has one of the lowest uninsured rates in the nation, the state's rate of uninsured increased by 30% between 2001 and 2004 — from 5.7% to 7.4%. The picture looks much worse for some, especially those served by the MinnesotaCare insurance program for the poor, which had its funding cut in 2001. Subsequent restoration of some funds has failed to restore coverage levels.

• For minorities, the uninsurance rate is much higher than the state average — Latinos (34%), American Indians (21%) and African Americans (13%).
• The rate of uninsurance for children 5 and under has increased from 3.9% to 6.8% during the same period. That means these kids are at risk of missing important screening and immunizations, starting them off in life with a long-term health disadvantage. TheChildren's Defense Fund estimates that 68,000 Minnesota children are without health care coverage
• For those living below the poverty line, 21% do not have health insurance.
• Due to cost, 46% of uninsured Minnesotans were unable to see a doctor when they needed to — compared to 41% nationwide and much higher than in neighboring states. By foregoing care now, the uninsured risk worsening and more costly conditions later.

Minnesota's large employers helped keep down the state's low uninsurance rate, but that's changing:

• Employer-sponsored health coverage dropped from 68.4% to 63%.
• Premiums for employer plans have increased.
• Fewer workers are eligible for employer plans, are self-employed or work for companies that don't offer plans.

Employers, the insurance industry, the medical profession, struggling families and the government all have a stake in solving the problems caused by the insurance gap, which ultimately adds to the costs borne by all. But politically, a legislative solution can't focus only on the poor, when middle income families' budgets are also being stretched by healthcare costs.

Healthcare is a key contributor to the state's economic growth and prosperity. Here are some groups working toward access to affordable care for all Minnesotans.

Cover All Kids Coalition Minnesota Medical Association Health Care Reform Task Force Healthy Minnesota: A Partnership for Reform Cover the Uninsured Week

The Tax Foundation has released its annual State Business Tax Climate Index, so be prepared to hear from anti-tax critics that Minnesota ranks #41. The study tracks a variety of factors in the tax system that the foundation says contribute to a competitive business climate. The main categories and their weightings in the overall ranking are: 1. 29.15% —Individual Income Tax Index 2. 21.50% —Sales Tax Index 3. 19.43% —Corporate Tax Index 4. 15.72% —Property Tax Index 5. 14.20% —Unemployment Insurance Tax Index The states with the best rankings? 1. Wyoming 2. South Dakota 3. Alaska 4. Nevada 5. Florida 6. Texas 7. New Hampshire 8. Montana 9. Delaware 10. Oregon The bottom 10 include: 41. Minnesota 42. Maine 43. Iowa 44. Nebraska 45. California 46. Vermont 47. New York 48. New Jersey 49. Ohio 50. Rhode Island No argument here that taxes on business are not the best way to raise revenue, or that in theory, lower taxes on business should be good for the economy. But it's also important to look at the results of public investment in a state that benefit business. Business tax climate is not the same thing as business climate — which also benefits from public investment in education, health care, transportation, and quality of life. When we look at other comparisons, being #41 on the business tax list doesn't look so bad. Education. Morgan Quitno's rankings of "Smartest States" de-emphasize spending for public schools and instead measure states based on student achievement, positive outcomes, and personal attention from teachers.

• Business tax top 10 – 1 "smartest state"
• Business tax bottom 10 – 5 "smartest states," including Minnesota

• Business tax top 10 – 1 "healthiest state"
• Business tax bottom 10 – 6 "healthiest states," inclduing Minnesota

Based on personal and professional experience, I've become convinced this is the ultimate unanswerable question, especially for politicians.

The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period.

As a result, wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960’s. UBS, the investment bank, recently described the current period as “the golden era of profitability.”

– Real Wages Fail to Match a Rise in Productivity, New York Times

The rise in productivity, along with the rise in average income, has been touted as evidence of a booming economy — both nationally and in Minnesota. But this is not real prosperity, which we hold is sustainable and widely shared.

Instead, we are settling into a period in which the benefits of economic growth are flowing disproportionately to corporations and wealthy individuals. The resulting prosperity gap is perhaps wider than at any time since the Gilded Age.

See the data from an analysis by the Minnesota Budget Project. Over the past two decades, the top 20% of earners have grown income much faster than the bottom and middle. If you were to look further up in the top 10%, the growth rate is even more dramatic. Growth rates for the upper 1% would be far off the top of the chart.

“Average” state income growth is distorted by this big growth at the top. The

Even for workers at the 90th percentile of earners — making about $80,000 a year — inflation has outpaced their pay increases over the last three years, according to the Labor Department.

“There are two economies out there,” Mr. Cook, the political analyst, said. “One has been just white hot, going great guns. Those are the people who have benefited from globalization, technology, greater productivity and higher corporate earnings.

“And then there’s the working stiffs,’’ he added, “who just don’t feel like they’re getting ahead despite the fact that they’re working very hard. And there are a lot more people in that group than the other group.”

Minnesota has long been a higher tax state, but that's not inherently bad -- it all depends on how we invest those resources. If our tax dollars are invested in the right public services, our competitive position is strengthened.

Through selective use of information, Michael Wigley and William Cooper portray a world in which tax cuts magically result in increased government revenue and a million flowers bloom ("Tax cuts are benefiting our economy," July 23). Unfortunately, the real world is less rosy and more complicated than they would have us believe.

They are correct in noting that capital gains tax collections are up, but mistakenly, in my judgment, attribute the growth to tax cuts. Federal capital gains tax revenue increased more rapidly during the Clinton years -- when taxes were increased -- than in either the Reagan years or the present Bush years, when taxes were cut.

To simplistically link the growth in capital gains revenue to tax cuts seems to ignore the historical record. One needs to take into account a complex array of forces influencing capital gains tax collections.

Gov. Pawlenty's Health Cabinet requested the Health Department to look at the cost of adding 383,000 people to the publicly subsidized MinnesotaCare program, and another scenario that relies on private insurance to cover the state's uninsured.

On the low end, it would cost about $663 million a year, and on the high end, more than $850 million.

As MPR reports:

[Health Cabinet] Chairman Cal Ludeman says the cabinet just wanted the information. He says it doesn't imply that the cabinet endorses universal coverage. "No, no, no," he says. "We want to know what it would be, what it could potentially cost if we're going to have the debate about it. That's what it is, and that's all it is."

Ludeman points out that the debate over universal coverage has been a part of legislative discussion for years. But he says the idea has taken on more momentum lately.

"We don't do this in a vacuum. We're fully aware of proposals in this Legislature," says Ludeman. "We've watched carefully the actions in Massachusetts, have talked to people in Massachusetts both legislatively and those folks trying to implement that universal coverage program. This is just simply an assessment of the situation to understand that whole picture."

Ludeman says his first reaction to the estimates, which range from $663 million to $852 million, is that they sound big.

"Some will say, 'Boy, that's not as big a number as I thought and let's do it,'" says Ludeman. "But a lot of folks would say, 'Wait a minute, this is a new entry in a government or taxpayer sense about where we're going, and that is a lot of money.' And I think as you look at the state budget, this sort of new cost would always be viewed as a lot of money."

Here are some interesting facts about Wyoming. It’s likely to have a $1.8 billion budget surplus next year, even though state spending has jumped by more than 50 percent in the past two years. In the past quarter, Wyoming had the highest per-capita income growth rate in the nation and the third lowest unemployment. It usually ranks at the top of the “best business climate” charts, because it has no personal or corporate income taxes. [...] The other interesting fact, of course, is that the country wants a lot more of what Wyoming has in abundance — coal and natural gas — and is willing to pay for it. The price of natural gas at the wellhead has gone up by more than 150 percent in the past seven years, often spiking much higher. That, coupled with the Bush administration’s freewheeling approach to energy development, has resulted in a petroleum boom that is transforming the state.

[...]

[T]o its credit, the state is trying to find a way to feed some of its revenue into programs that will help even out the shock when the boom busts — or simply tapers off. It is putting large sums into its Permanent Mineral Trust Fund, which collects a portion of the severance tax paid for Wyoming minerals, and it is adding to what it calls its Legislative Stabilization Reserve, a temporary savings account. The state has at last created a wildlife trust fund first proposed in 1982 but regularly defeated in the State Legislature, and it has endowed scholarship programs and the building of new schools.

It’s hard to argue with prosperity, but a lot of people in Wyoming are worrying about its ultimate costs.

– "Boom Times in Wyoming, and Worrying Times as Well," Verlyn Klinkenborg, NYT

Good for them. At least with mining and gas production, Wyoming's citizens can see the scars created by the temporary prosperity machine and are building up a little insurance.

With our Minnesota economy based on knowledge — instead of mineral extraction and $25-an-hour water truck drivers — the investments we make today determine how educated, healthy and productive our workforce will be two decades from now. It's harder to see that future through the fog thrown up by anti-tax advocates and the politicians who love them.

But public infrastructure is also vital to a productive economy and it's tangible. So how are we doing there?

The American Society of Civil Engineers — not yet branded as a notorious left-wing think tank — publishes a state-by-state report card on the condition of America's infrastructure. You can read it here.

Not a strip mine filled with noxious chemicals, but not a pretty picture, either.

[Note: A version of this was cross-posted at Across the Great Divide.]

Despite last year's projections that Minnesota would once again face a deficit, we are running a surplus, while at the same time our state no longer ranks in the top four or five in per capita taxation but has dropped to 16th. In Rhode Island, about a blue a state as you can get, the top tax rate has been cut from 9.9 percent to 5.5 percent, and the state has gone from the third-highest individual income tax rate to the 27th. According to William Murphy, the Democratic House speaker, to the business leaders who choose where their companies move and create jobs, the tax rate makes a big difference. In New Mexico, Democratic Gov. Bill Richardson has cut the top income tax rate in half. New Mexico now has a half-billon-dollar surplus and has seen tax revenues increase by 27 percent this year, faster than any other state in the union.

Yes, it's counterintuitive to claim that lowering taxes increases tax revenues. But it does, not only because it attracts more businesses and jobs. It's also because the more money people have to spend on themselves rather than have confiscated by government, the more those dollars circulate to generate greater demand for goods and services, the more jobs that are created to supply those goods and services and the more income that is spread among more people -- and thus, more tax revenue.

–Dan Cohen

Cohen claimed that New Mexico cut its top income tax rate in half. Actually, they are phasing in a cut of 40%, but so far it’s only about 30%. More significantly, Cohen claimed that New Mexico’s state tax revenue rose by 27% in one year after the tax cut. But the state’s own data for the past two fiscal years show that the general fund, which includes all the major state taxes, grew only 7.7% and then an estimated 6.3% -- about one-fourth the annual rate of growth that Cohen claimed. Okay, his "facts" don’t match what the government reports, but New Mexico did show some growth after cutting the income tax – so is Cohen right to assert that the tax cut caused the revenue growth? Absolutely not. New Mexico is a major producer of oil and natural gas, and a spike in the price of oil and gas boosted the taxes and lease fees on production in the state by 38% this year (on top of about 30% the year before). This leap explains all the growth in New Mexico’s revenue – personal income tax collections actually dropped this year. The supply-side theory Cohen is selling – that tax cuts create enough economic growth to more than pay for themselves – failed during the administration of President Reagan and is failing again under George W. Bush, resulting both times in skyrocketing national debt. And Minnesota’s tax cuts in the late 90s failed, too – creating a fiscal crisis and a slower-growing economy.