one of the push factors that causes our homegrown doctors, IT professionals and
others to take opportunities elsewhere.’ Yes, it’s all about the personal tax rate—
nothing to do with a chronically under-resourced health service, an increasingly
under-funded education system, the stalled roll-out of broadband, the spiralling cost
of housing to rent or buy, and so on and on and on . . .
Trickling economics
Does Fine Gael’s iteration of the repeatedly failed 'trickle-down' theory make
economic sense? It's a cliché now to offer a Scandinavian model for an example of a
successful high-tax and high-service economy, so I thought I'd call on an example
from the home of trickle-down, the US.
During the eight years that Tim Pawlenty, a fiscal conservative, was governor of
Minnesota he refused to raise taxes and created 6,200 jobs. He left behind him a
$6.2 billion budget deficit and an unemployment rate of 7%. Pawlenty's successor,
Mark Dayton, in his first term, raised tax rates on individuals earning over $150,000,
and on couples earning over $250,000 when filing jointly; he guaranteed to raise the
minimum pay to $9.50 an hour by 2018 and legislated for equal pay for women.
Republicans squealed; Mark Uglem, a Republican member of the Minnesota House
of Representatives, warned that 'The job creators, the big corporations, the small
corporations, they will leave. It's all dollars and sense to them' (motherjones.com,
February 2017). Noonan, Donohoe, and Varadkar make a similar argument.
After four years with Dayton in office, that $6.2 billion budget
deficit was a $1 billion budget surplus.
Did the Minnesota sky fall in? Did the big employers
and corporate taxpayers flee? Did the deficit increase?
Did a policy of increasing both minimum pay and the cost
of hiring women result in lost jobs? Well, no to all those
questions. After four years with Dayton in office, that
$6.2 billion budget deficit was a $1 billion budget surplus.
There were 172,000 new jobs, boosting the economy and
increasing the tax take. Minnesota's top income tax rate
is now the fourth highest in the country and the
unemployment rate, at 3.6%, is close to half the rate
when Dayton took office and the fifth lowest in the
country.
Mark Dayton
According to 2012-2013 U.S. census figures, Minnesotans had a median income
that was $10,000 higher than the U.S. average. By late 2013, Minnesota's private
sector job growth exceeded pre-recession levels, and the state's economy was the
fifth fastest-growing in the United States (motherjones.com, February 2017).