Here’s a tax-and-budget Question for the Century, as we brace ourselves in Minnesota this summer for continued cuts to our state and local governments, all in the holy cause of not raising state income taxes ever again under any circumstances whatsoever.
Answer this: If government and taxes are so bad for growth and general prosperity, why did we grow so much and get so generally prosperous over the last century, a period during which government and taxes grew exponentially — especially in Minnesota?
Since 1909, and with big spurts in the 1930s and 1970s, the federal-state-local government’s share (anti-tax types like to call it “take”) of income in Minnesota and the United States grew steadily and sharply, from about 5 percent to 35 percent.
A seven-fold increase in taxes should have left us a howling wasteland, if one subscribes to the anti-government theory of anti-tax zealots. We should have less wealth, no creativity, diminished entrepreneurialism, little technological innovation, and no incentives to do anything but seek or wait for the next government check.
The exact opposite happened as government grew.
Quality of life improved
Our mostly well governed nation, and high-tax Minnesota in particular, and other democratic and capitalistic nations with expanding public sectors, got very rich during this period. And more important, our quality-of-life improved dramatically, beginning with life expectancy but extending into a multitude of aspects ranging from education to mobility to more fairness and equality for the two-thirds of society (women and non-white males) who were second-class citizens in 1909.
This question and sound answers to it are posed strongly and clearly in a gem of a little book penned right here in Minnesota, “Cracks in the Foundation: Refuting the Conservative Case for Low Taxes and Small Government.”
Its author is Elaine J. Handelman, a lifetime Minnesotan and a recent addition to the Growth & Justice Board of Advisers. She’s neither a left-wing academic nor an advocate for taxpayer-funded causes. She’s a business professional with expertise in quality improvement initiatives for the private sector who has a real grasp of economics and history.
“If freedom varies with the portion of our income we keep,” Handelman observes in the book, “then we were freer in 1900.
“Yet most of us, I suspect, would prefer the freedom we had in 2000 … The capacity to exercise choice is an important part of our freedom and there is no question that the number and quality of choices increased over the century … (And) that growth would not have been possible without significant investments in the public sector.” Handelman, with careful footnotes and sourcing, nails down the facts of public-sector growth and all the ways taxes have provided humanity-enriching investments — from building national parks to ensuring financial security for old age to probably the most cost-effective spending of all, our state and national appropriations in behalf of educational equality and attainment.
The spin-off issues in the debate
Recognizing and celebrating the basic virtues of business and profits and private enterprise, Handelman scores strong points on several other important spin-off issues raised in the eternal debate between public and private.
• The oft-heard “points of light” claim — that private charities and nonprofits can fill the void if our governments abdicate that responsibility — is just not realistic as a total solution. Private spending for the economically disadvantaged currently amounts to only 10 percent of what government spends. If government pulls out of the safety-net business, does anyone really expect Americans to increase their giving tenfold? Or even half?
• The notion that the private-sector always does it better than the public sector is dispelled, with anecdotes and statistics. Handelman cites numerous success stories in government, including the consensus that programs like Medicare and Social Security are remarkably efficient and low in overhead costs.
• And yes, taxes obviously have their limits and cannot be raised without consequences for growth. And governments need to redouble their efforts at accountability and cost-efficiency. “Everyone agrees that taxes cannot be increased endlessly (and) the manner in which the tax burden is distributed on businesses and individuals has economic consequences.”
Handelman concludes: “We all agree that government should defend us against enemies foreign and domestic, provide a safe environment and enforce the law. I argue for the value of government in additional roles: Our public investments provide us with increased individual choice, expanded business opportunities, increased scientific and technological ideas for our entrepreneurs to exploit, improved health and an improved quality of life.”
I couldn’t have put it better.
Dane Smith, president of the progressive-leaning St. Paul-based think-tank Growth & Justice, enjoyed a 30-year career as a writer for the Star Tribune and Pioneer Press, where he delved into state, local and federal government and politics. This article originally appeared in the St. Paul Legal Ledger Capitol Report.