State of the State Fact Check
February 11th, 2010 at 3:44 pm By Jeff Van Wychen
Governor Pawlenty’s final State of the State (SoS) address included a number of statements regarding taxes, spending, and Minnesota’s economic performance. Some of the statements were factual and others—well—not so much. The following examination of lines from the Governor’s speech will be limited to claims regarding taxes, government spending, and the economy.
“We’ve seen Minnesota GDP grow by more than 25% during my time in office.”
Presumably Pawlenty is referring to the period from 2002 to 2008 (the most current year for which state GDP data is available from the U.S. Bureau of Economic Analysis). If so, the Governor was being modest; according to data on the BEA website, Minnesota GDP grew by 32% over this period. However, this is four percent below national GDP growth. On major indicators of economic performance—including GDP, income, and job growth—Minnesota has lagged behind the U.S. average during Pawlenty’s tenure.
“We have the 3rd highest corporate income tax rate in the developed world.”
This is a repeat of a fallacy that the Governor used in last year’s SoS. Based on information from the conservative Tax Foundation [PDF], the highest statutory corporate tax rate in at least three other states is above Minnesota’s highest rate. It is difficult to see how Minnesota can be among the top three in the developed world if we are not even among the top 3 in the U.S. Furthermore, statutory tax rates are not a good way to measure the corporate tax burden because it overlooks differences in corporate tax base, which varies dramatically across jurisdictions. This issue was discussed in a January 2009 Minnesota 2020 analysis.
“Minnesota’s business tax climate is the 8th worst in the nation.”
This sort of claim generally comes from anti-tax groups that examine business tax burdens while paying relatively little attention to the benefits that businesses derive from public investment. Based on more holistic measures from the annual Development Report Card (DRC) for the States, Minnesota consistently ranks among the top 20 states in the nation in terms of both business vitality and development capacity. The DRC focuses on actual outcomes, such as business and job growth, and not just inputs, such as taxes and other costs.
“It [the JOBZ program] is needed and it works.”
Pawlenty needs to read the JOBZ report [PDF] from the non-partisan Office of the Legislative Auditor. As summarized by Minnesota Public Radio, the report concludes that “JOBZ has not met its goal of targeting areas that are considered economically distressed and in most need of assistance. In addition, the program has subsidized some businesses that are competing with existing Minnesota companies for the same customers. The report also raises questions about the true economic impact of JOBZ.”
In football, when a team is desperate, the coach draws up a Hail Mary and hopes it salvages a game full of poor planning or poor execution or both. For every one ESPN moment where the bomb works, there are dozens of defeated teams that second guess the coach, quarterback and themselves.
