There are a lot of bad reasons for cutting taxes — and some good reasons for some tax cuts — but few of the anti-tax cut arguments made in Minnesota today are as weak as the tax flight argument. Much has been written debunking the Tax Flight Myth, but it persists, perhaps because sound economic reasons don’t fit our current fiscal situation.
Leave the technical arguments to the experts which, of course, will mean nothing to the anti-tax folks anyway. So I will focus on the absurdity of the Tax Flight argument and point out why it really isn’t a persuasive one in smart tax circles.
If the argument is going to be persuasive, there needs to be some sort of advantage or gain in the argument. The Tax Flight people seem to think people will take their side of the argument because they don’t want them to leave. I think that’s a weak argument.
People who support fair tax policy, community investment, and a smart government might hope this rhetoric isn’t a threat but rather a promise. After all, if you want to fix government and resolve problematic funding issues do you want anti-tax takers getting in the way? Probably not. South Dakota is waiting and you’re free to leave.
But let’s hope they don’t leave too soon. Watching the anti-tax crowd get all puffed up and threaten to leave is kind of fun in the way that listening to a petulant brat threatening to run away from home is fun. It’s almost cute.
We could do what smug parents do and offer to pack the suit case, but I think a better approach — one that is both good for the state’s bottom line and like a good kick in the ass as they leave — would be a tax on interstate moving services. I don’t know…30% on interstate moving contracts seems like a good sting.
How about a tax on home sales not reinvested in the state? Now there is a good idea!
Of course this isn’t a good idea and I am only being flippant, but it is a fun idea, at least when you think about sticking it to anti-tax hysteria. It wouldn’t really wouldn’t do much anyway. Even if you could tax people moving for tax purposes, it wouldn’t amount to much. Tax flight isn’t a big deal.
People want to live in places with a high quality of living just as people choose to live in better neighborhoods. Places with a high quality of living require support, including smart public investment. It is one thing to say you don’t like taxes. It is another to understand how your taxes are being invested. In an era of reckless public disinvestment and chronic underfunding of government, it isn’t clear to me that many anti-taxers understand the benefits of fair tax policy and adequate public funding of state services in the first place. And that is at the heart of the problem.
Taxes are not inherently bad, but how we raise taxes and how we manage revenues has become a mess. It is a wicked brew of favors, incentives, and transfers increasingly skewing away from the common good and toward special interests. A simple, progressive income tax — combined with business tax parity — can keep the state economically competitive and fund government services. The system also needs property tax reform that finds a balance which will restores stronger state-funded local government aid.
Grown ups discuss things like this. Children threaten to run away from home.