Retiring state economist understood the value of an educated workforce

/ 16 July 2013 / eunice

Ely Timberjay Editorial, July 16, 2013 – Tom Stinson, who recently retired as state economist, said the key to Minnesota’s economic success is its workforce.

It’s always been that way, according to Stinson. In a recent interview with the Star Tribune, he noted that when he compared where the state was in the 1960s to today, what jumps out to him is the improvement in the education of the workforce. “It wasn’t that we had bigger, faster machines or anything like that,” he told the Star Tribune. “It was the productivity of the worker. That’s been the Minnesota competitive advantage.”

Despite progress, Minnesota can not afford to be content with the way things are. Our workforce needs are evolving and keeping pace with emerging industries and advancements is a continuous job.

That’s why investments in education are so critical to the state’s future. The state Legislature took some key steps in providing more funding for public education, and higher education institutions have also responded to the challenge by tailoring more courses for industry needs. It’s also worth noting that a two-year freeze on tuition will help keep higher education within the grasp of more people. Years of steady increases in tuition had already moved higher education beyond the reach of far too many families.

An aging population presents another dilemma. How can the state keep more people more productive in jobs for longer periods as the ranks of the employed become weighted with more mature workers?

Too often investments in education have taken a back seat to cutting taxes. Lower taxes have been hailed by many as the magic solution to reviving the economy. And although an argument can be made for targeted tax relief to help emerging industries gain a foothold, there is no concrete evidence that just reducing taxes will stimulate the economy.

In fact, numerous academic studies have found no correlation between state tax levels and various measures of state economic performance. Other studies have found that higher taxes are actually associated with better economic performance when they finance higher-quality education and the better infrastructure needed and desired by businesses and households.

Put simply, there is no consensus, nor even much evidence, that cutting taxes is a good strategy to boost state economic growth and create jobs.

Furthermore, claims that reduced taxes will spur the economy ignore the fact that corporate taxes have fallen from as high as 50 percent in the 1950s to the current 35 percent rate. Meanwhile, both before-tax and after-tax corporate profits as a percentage of national income are at near historic highs.

Claims that the U.S. corporate tax rate is uniquely burdensome to U.S. business when compared with corporate tax rates of its industrial peers also fall flat. Although the United States has one of the highest statutory corporate income-tax rates among advanced countries, the effective corporate income-tax rate of 27.7 percent is quite close to the average of other wealthy countries, which is 27.2 percent, weighted by Gross Domestic Product.

Investments in education are the best way to ensure the state builds a strong and secure economy by having a workforce that is ready to meet the needs of today’s employers and has the critical thinking skills to adapt. Just cutting taxes is no guarantee of prosperity and, if done at the expense of critical investments in education or infrastructure, could actually do more harm than good. As former State Economist Tom Stinson observed, “Minnesota is not broken.” It just needs to stay in the forefront of providing a well-educated and productive workforce.

http://www.timberjay.com/stories/Taxes-and-the-economy,11054