Archives for John LaPlante

3 of 4 Minnesotans Oppose Vikings Tax

Posted by John LaPlante on Monday, October 25th 2010

Yet another poll shows a majority of Minnesotans oppose taxpayer funding for a Vikings stadium. But will they end up paying a stadium tax anyway?

According to an account in the Star-Tribune, “two-thirds of Minnesotans say the team should stay in the Metrodome and 75 percent oppose public subsidies for the project, a new Minnesota Poll shows.”

I’ll admit that my thoughts on the subject–read my lips, no stadium taxes–are compatible with my general lack of interest in the NFL generally. But there are two more fundamental points to consider. One, stadiums don’t “create jobs,” they merely concentrate in one location spending that would otherwise occur elsewhere–in bowling alleys, on food, and so forth.

The second point goes to the question of where you stand on the role of government in the market: Should it provide a stable, predictable legal and regulatory environment within which employers operate, or should it pick and choose specific industries or even businesses to support?

Targeted tax benefits are sold to the public on several grounds, such as environmental benefits (various subsidies to Big Ag and the ethanol industry) or job creation in especially “worthy” locations (the JOBZ program).

In this case of stadiums, the rationale, aside from the questionable economic impact angle, is simply this: “We like this business more than others, and want to lavish some love on them.” That’s why we create a tax for the Minnesota Twins, and debate creating one for the Minnesota Vikings, but not, say, Mike’s Minnesota Movers. I could riff on MMM for a while–hey, let’s create a taxing district to oversee the creation of a new warehouse and shipping terminal for Mike; he’s got some great-looking trucks, hooray!–but I’ll spare you.

The difference between “saving Detroit” through a government takeover of GM and enacting a tax to “retain the Vikings as a state asset” is one of degree, not kind. Both involve elected officials handing out special favors that will decide the shape of the business landscape, rather than letting the personal preferences of millions of freely choosing consumers do the job.

By the way, there’s an interesting class angle here: “Minnesotans earning $75,000 or more were among the biggest supporters of public subsidies for a new Vikings stadium, while those earning less than $30,000 were the strongest opponents.” More on that, perhaps, on another day.

category: Blog Posts, John LaPlante, Limited Government, Tax Policy

Removing Poor Teachers from the Classroom is Pro-Child

Posted by John LaPlante on Sunday, October 24th 2010

Eric A. Hanushek, whose research into the effects of teachers on student learning was featured in the movie Waiting for Superman, disputes the argument that efforts to make it possible to remove the worst teacher from our nation’s schools is somehow anti-teacher. He recently did so in an op-ed published in the Wall Street Journal.

The article is behind a paywall, but here are some key points he makes:

“No longer is education reform an issue of liberals vs. conservatives.” Good for children, and for our future.
“All sides” now accept the idea that teacher effectiveness is key to student learning.
“The typical teacher is both hard-working and effective. But if we could replace the bottom 5%-10% of teachers with an average teacher—not a superstar—we could dramatically improve student achievement. The U.S. could move from below average in international comparisons to near the top.”

By the way, you don’t have to be anti-union to want to change personnel rules in public schools. Consider the group Put Kid First Minneapolis.

First, the credential of the people behind the group:
They believe that teacher unions are good and necessary: “If you want to bust unions, find a different group. We believe unions can create a more just and equal world. In our perfect world, teachers would make more than lawyers and bankers, and, to achieve that, we’ll need collective bargaining.
“We support teacher tenure as a form of due process.” See the link above.
“We’re agnostic on merit pay.”
“We oppose vouchers for a whole host of constitutional and good government reasons.”

So they’re not the kind of people who want to bust unions, implement a voucher program, implement merit pay, or eliminate tenure.

But they do see a need for changes:

“We do not support teacher tenure as a life-time job guarantee, regardless of performance or what students need.”
“Allow school leadership teams (the principals, plus teacher and parent representatives) the freedom to hire and retain the most dynamic, talented, licensed teachers they can find, regardless of seniority or whether those candidates currently work for the district.”
Use value-added tests, classroom observations, and parent/student surveys to evaluate teachers, recognize good ones, and remove poor ones.
Use hiring freedom (the second point) to let schools take race and ethnicity into account when hiring teachers. I’m not comfortable with this, though I can see their point.

The development of the group Put Kids First Minneapolis is evidence that Hanushek is right. Giving principals authority to hire and fire teachers–and then holding them accountable–is not the only shake-up that public schools receive. But it’s an essential element, without which we’ll be denying many children the right to a high-quality education.

category: Education, John LaPlante, Teachers

Part 3 in a Series on the Minnesota Corporate Income Tax Debate: Higher Rates Mean Fewer Jobs

Posted by John LaPlante on Wednesday, October 20th 2010

In our last two posts in this series, we looked at the effects of marginal corporate income tax rates on investment and Foreign Direct Investment (FDI), as reported in peer-reviewed economic journal articles. Today, we look at the effects of marginal corporate income tax rates on the number of businesses and the creation of new businesses.

Entrepreneurs are the people who take an idea and transform it into a business. In doing so, they provide valuable goods or services to their customers, and new employment opportunities for others. Entrepreneurial startup companies also are important players in introducing new ideas and business methods into the economy, ushering in innovations that improve the lives of consumers. Finally, startup companies create a disproportionate number of new jobs. According to economists John C. Haltiwanger, Ron S. Jarmin, and Javier Miranda, “firm startups account for only 3 percent of employment but almost 20 percent of gross job creation.” (p.31)

One way to measure a nation’s success in creating businesses is to look at the number of formally organized and registered businesses. Naturally, you’d want to adjust for population, as a big country ought to have more businesses than a small one. Djankov, et. al. (2010) used a ratio, looking at the number of companies per 100 people of working age.

(To be precise, they looked at “the number of registered limited liability corporations per 100 members of the working-age population as of 2004,” and called this the “business density” variable.)

What did Djankov and his co-authors find when they ran the numbers? They concluded, “The effects of taxes on our measures of entrepreneurship are large and statistically significant, and show up with both the statutory and the effective tax rates.” In other words, tax rates matter. They continue, “A 10 percentage point increase in the first-year effective corporate tax rate reduces business density by 1.9 firms per 100 people.”

In addition to looking at the number of businesses, period, we might want to look at the number of new businesses, which represent new opportunities, new ideas, and new blood. Djankov and his co-authors looked for the ratio of new businesses to working-age adults, each year for five years.

(To be precise, they examined “the average number of limited liability corporations (or their country-specific equivalent) that were registered per year between 2000 and 2004. Only businesses with more than one employee that are not sole proprietorships are included. The variable is measured as a percentage of the stock of such firms.” They label this the entry rate variable.)

They concluded, “a 10 percentage point increase in the first-year effective corporate tax rate reduces the average entry rate by 1.4 percentage points.” In other words, higher tax rates mean fewer new businesses offering goods and services, and employment.

The results are clear: higher marginal corporate income tax rates reduce entrepreneurship. Fewer start-up companies mean fewer jobs created.

category: Blog Posts, Jobs, John LaPlante, Tax Policy