Rep. Hortman argues for lower taxes to make Minnesota more competitive

Two weeks ago Gov. Tim Walz and the two top leaders of the state Legislature struck what was grandly termed a ‘global agreement’ on the state budget for next biennium. The two-page document contained the dollar amounts each of 14 spending bills could not exceed and 10 other provisions.

The details are currently being thrashed out, largely behind closed doors. But, as Minn Post reports:

…that deal is not the only deal agreed to by the three leaders. [House Speaker] Hortman and [Senate Majority Leader] Gazelka now say there were other stipulations that didn’t make it onto the “Global Agreement Working Group Framework,” including additional tax cuts… 

Under the ‘global deal’:

…the next budget would include $644 million in tax cuts in the first of two-years, with two measures making up the bulk of the money: forgiveness of taxes owed on pandemic-related paycheck protection plan loans; and taxes owed on the $600 per week unemployment benefits.

But on Friday, Rep. Hortman:

…acknowledged that two additional tax cuts must be in the final taxes omnibus bill: one favored by her, the other favored by Gazelka.

Rep. Hortman’s favored cut is a $20 million movie production tax credit. What is her argument for this?

Hortman said it would let the state compete with other states that offer tax incentives to producers…The tax credit could bring movie and TV production to the state, employing film production workers who suffered near complete job loss during the pandemic.

This is a frank and welcome admission. Too often, when tax policy is debated, some argue that it doesn’t really matter how high our taxes are, people will carry on regardless. According to these folks, our high corporate taxes do not deter businesses from forming or moving here and our high income taxes do not stop people from staying or coming here.

Clearly, Rep. Hortman disagrees. She argues, rightly, that taxes are a factor in the location of business activity and that, if we want to increase the amount of activity we see here we should decrease the amount of tax we levy on that activity.

The question is why limit this to movie makers? Why not apply that logic equally to all business activities? The logical consequence of Rep. Hortman’s argument is a cut in Minnesota’s corporate income tax. Let us hope others at the Capitol start to see things Rep. Hortman’s way.

John Phelan is an economist at the Center of the American Experiment