Hennepin County Commissioner Jeff Johnson was elected last year and began his term in January. He’s already figured out that County Government has one of the most sweeping powers to levy taxes and yet has the least transparency and accountability of any level of government in how it spends taxpayer money because much of its activity goes unreported in the media. In a bid to rectify that in his own county, Johnson has decided to blog about his experiences and what he finds at Hennepin County Taxpayer Watchdog. Watch this space.
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Taxing the Rich to Compensate the Rich
In Part 2 of its series on the University of Minnesota, the Star Tribune writes “Being a world-class research institute requires top-notch faculty and facilities.” It notes a specific example –
Mikhail Shifman is the kind of professor universities fight over. His discoveries, research and teachings are key reasons the University of Minnesota’s physics department is highly regarded.
So when Penn State tried to recruit him, the U countered with a bump in salary, a renovated office and $25,000 per year for five years to pay a research collaborator. In total, it was less than Penn State’s offer, Shifman said, but the U won out.
The article also notes the national and international competition for star-power professors.
In its effort to be among the top-three research universities, the U has focused on hiring superstar researchers who require “compensation, plus facilities, plus support staff, plus instruments,” said professor Judith Martin, chair of the University Senate Finance and Planning Committee.
“This isn’t a local market,” Martin said. “Particularly in the sciences, it’s an international market. That’s not always well-understood by students and, from my perspective, the public. People think anybody could teach a class.” …
Recently, the U has faced “a real escalation” in competition to keep the star professors, said Provost Thomas Sullivan. “The reputation of a university rests on the reputation of its faculty,” he said.
During the 2007-08 school year, the Twin Cities’ faculty of about 2,300 received 111 offers from other universities that the U countered. The year before, there were fewer than 100. The counter-offers usually include a mix of “additional salary, additional lab space and greater support for graduate students,” Sullivan said, and their cost is borne by individual colleges or departments.
An inference from the STrib story that will certainly be made by the tax increase crowd, is that the state needs to generate more tax dollars so it can spend more on higher education to keep the University of Minnesota competitive. The state needs to provide more tuition aid so that students aren’t faced with tuition increases. And of course, those tax increases must be paid for by “the rich” – you know, like those highly sought after college professors that the University is paying well over six figures to attract and keep.
So, when the University increases student tuition, not all of the increase goes to pay a highly skilled professor for the actual value delivered to the student and the University; the student also pays increased tuition to cover Minnesota’s higher individual income tax rate on high earners. Lab technicians, professors without tenure, cafeteria workers and other University employees with relatively interchangeable skills, receive lower wages than they otherwise might because the University is not just compensating the star-power professor for his value students and to the University; the University must overcompensate the professor for his actual value to compensate him for Minnesota’s tax code.
There’s an ironic circularity in all this: The state, we are told, needs to raise taxes on the state’s highest earners so the state has the money to invest in higher education and student tuition aid to compensate for increased costs of attracting star-power professors – who require salaries that put them among the state’s highest earners.
As I noted in a recent Pioneer Press column –
A uniquely skilled individual commanding a high salary can work just about anywhere he chooses. The mobile worker, the kind who pays the most taxes, will gravitate to where his net income, not gross income, is highest. To lure and keep highly productive individuals in Minnesota, Minnesota employers, including school districts looking for superintendents and universities seeking nationally known professors, must pay higher gross salaries to compete with low-tax states.
Higher salaries for those already earning top dollar don’t just increase the salary gap; they contribute to higher consumer prices and lower wages for non-mobile workers — the rest of us. When a company pays top-earners more to compensate for high tax rates, it means fewer dollars available to pay the rest of a company’s employees, further increasing the real wage gap irrespective of what the Tax Incidence percentages indicate.
Sensible, economics-based tax reform, “economics” being one of the subjects taught at those institutions of higher learning, might consider reducing income-taxes to make Minnesota more attractive to highly skilled and mobile individuals. Certainly we should not make it even more difficult and expensive for the University by raising taxes on the people it is trying to hire.
Interest-Group liberalism — Root, Root, Root for the Home Team
Lowi coined the term “interest-group liberalism” to describe policy-making through deference to organized lobbies. Interest-group liberalism rests on two fundamental beliefs: Government is a positive force and a champion of good, and virtually all interest-group demands are legitimate. Consequently, a primary function of government becomes balancing and advancing any and all organized petitions.
The “end of liberalism” comes about when the appeasement process evolves the perfect storm of unrestrained bureaucratic growth, an unmanageable web of conflicting regulations and an unsustainable skyrocketing budget. Are we there yet, at the end?
Not by a long shot, and the reason is simple: Interest-group liberalism is the prevailing political philosophy of the American public, of Democrats and of Republicans — all the post-election Republican talk of a return to “conservative values” and “conservative principles” notwithstanding.
Slate writer Jacob Weisberg picked up on Lowi’s theme in a 2005 piece analyzing the governing philosophy of then President George Bush. When Democrats were in power, Weisberg noted, they were beholden to unions, lobbies for women’s rights, civil rights and gay rights, senior citizens lobbies, welfare advocates, Hollywood and trial lawyers. The hallmark of Democratic governing was a focus on policies that meant more to those groups than mattered to the welfare of the country at large.
When Republicans assumed power in 2000, the implied promise was the end of liberalism. Instead, Bush-era Republicans practiced their own brand of interest-group liberalism. Out with the old and in with military contractors, evangelical Christians, wealthy investors, gun owners and an alternative conservative media — new regime, new supplicants, but the same process.
Like the repentant weight-watcher who will do whatever it takes to slim down except diet and exercise, after getting hammered in the past two election cycles Republicans seem willing to do whatever it takes to restore conservative “values” — except adhere to conservative “principles.” Consider the touting by Republican Rep. Erik Paulsen of a legislative amendment he authored.
“Our military veterans who own businesses face unique challenges, and government must ensure the policies in place to assist them are achieving their goals,” Paulsen said in a press release. The “Job Creation through Entrepreneurship Act,” to which Paulsen’s amendment ensuring benefits for veterans was attached, also includes specific largess for women, Native Americans and a new grant program for Small Business Development Centers. It passed the House 406-15.
Paulsen and Republican Rep. John Kline voting for a bill that champions small business and veterans is certainly in keeping with “conservative values” (GOP Rep. Michele Bachmann did not vote). But using public funds to create private benefits for multiple interest groups by expanding the federal bureaucracy and deficit spending most certainly violates the conservative principles of limited government and fiscal responsibility (not to mention constitutional fidelity).
Such interest-group liberalism turns logrolling (legislators trading votes) from “a necessary evil into a virtue.” So at a state level, when southern Minnesota legislators earmark state funds for an international volleyball center in Rochester, there is nary a peep from their Arrowhead compatriots who expect reciprocal support in anticipation of a photo-op at a Duluth arena expansion. Both outstate areas support a budget-draining light-rail system between Minneapolis and St. Paul. A combined financial obligation on all Minnesotans, these projects respectively mean more to Rochester, Duluth and the Twin Cities than they matter to the welfare of the state at large.
The irony is that by practicing interest-group liberalism, both Democrats and Republicans are conservatively protecting an unsustainable status quo. Chances of actual reform — say, replacing the inefficient corporate income tax with a more efficient broad-based, low-rate sales tax — is problematic, not because of any flaw in economic logic, but because Democrats and Republicans both have supporters threatened by the reform. Their here-and-now concerns matter more, politically, than the future economic welfare of the state.
While many are outraged at government largess to interest groups other than their own, few are eager to gore their own oxen for the sake of principle. Nonetheless, unless we the people demand reform, it’s more likely the Twins will sweep a series in Yankee Stadium than we will ever achieve an “end of liberalism.”
This commentary originally appeared in the St. Paul Pioneer Press Thursday, May 28, 2009.