Thursday, June 24, 2010

Taxes And Talent Migration

Cutting taxes won't make your state or region a talent magnet. It won't keep graduates from leaving. At issue is your state's tax regime. A lean and mean government machine is the policy flavor of the day. Michigan Future suggests that the gubernatorial candidates there don't understand the reality of today's economic geography:

Right next door to South Dakota is Minnesota. Minnesota has attracted a lot of college grads (highest percentage in the Midwest) and thus has the lowest unemployment and the highest per capita income in the Midwest — and relatively high tax burden. South Dakota has relatively few college grads, and much lower per cap income.

Why does [Rick Snyder], along with his competitors for governor, want Michigan to follow the strategy of a failed state, like South Dakota, and not a successful state, like Minnesota, when he lived through such a difficult decision? If Michigan follows the low-tax, low-service strategy, it will get low-tax, low-service results…a few low-paying factory jobs may come, but they will be at the expense of public policies that attract young talent, and our economy will never return to prosperity.

The main attraction in Minnesota is Minneapolis/St. Paul. As described above, low taxes aren't the draw. Furthermore, the candidates are mired in a policy debate that might have made sense 50-years ago. But I don't buy the claim that cool urban amenities put big tax Minnesota on top of the Midwest.

What should be obvious is that Minneapolis has long been a brainy city. Smart regions tend to attract more smart people and the rich cities get richer. While South Dakota may not be the answer for Michigan, Minnesota is a different ball of wax. The global economy shifted in such a way that privileged one of that state's greatest assets, a well-educated labor force.

I'm of the opinion that a significant rise in educational attainment comes before all the Cool Cities boondoggles. Field of Dreams economic development is any more effective than gutting government and cutting taxes. (Via Ed Morrison) I recommend all those concerned in Michigan read the testimony from University of Akron's Wayne Watkins to the US House Subcommittee on Research and Science Education.

No comments: