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Editorial: Competitiveness needs a broad look

There's likely more to state job lag than tax policy.

Last update: April 28, 2008 - 6:47 PM

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THE FOCUS

"This commission will specifically focus on improving our job climate, and is comprised of people who have direct experience in creating private sector jobs, including job providers, entrepreneurs, private sector employees, investors, CPAs, and others with expertise in finance and taxation."

From the office of Gov. Tim Pawlenty, announcing appointments

to the 21st Century

Tax Reform Commission

More from Editorials

The tax study group that Gov. Tim Pawlenty said in February he would initiate for the sake of more job growth was finally launched last week, with a lineup true to his promise.

It's loaded with corporate, investment and entrepreneurial experience. Four of the 15 members of the group the governor is calling the 21st Century Tax Reform Commission work for Minnesota Business Partnership companies, the state's largest. There are two CPAs, a tax policy professional, a pair of business association representatives, a professor, a venture capitalist and a former GOP state senator.

They add up to the kind of group a Republican governor would ask for advice, if he had already concluded that the state's job lag in recent years is mainly the result of a defect in state tax policy. That, clearly, is Pawlenty's view. In his State of the State address, he said, "Minnesota's tax policies, job climate and large government discourage economic growth. We need to reduce taxes and regulations that discourage job growth, income generation, investment, entrepreneurial activity, research and exports."

The governor has a point. Tax policy's impact on business deserves review. For example, about 40 percent of the sales tax revenue generated in Minnesota is paid by businesses, some of it on purchases that are exempt from taxation in other states. Those taxes not only pose a competitive disadvantage, but also impose a hidden, regressive tax on the consumers who ultimately pay it. It's time to consider more transparent, progressive alternatives.

But those ideas are already being examined by a study commission with a broader focus, on state budget trends. That blue-ribbon, bipartisan group of 15 began its work late last year. It includes seven members appointed by either Pawlenty or GOP legislative leaders. The new commission appears positioned to duplicate that effort.

What's more, by focusing solely on taxes, Pawlenty's commission won't get a complete picture of what ails Minnesota's competitiveness.

The new commission's assignment overlooks what may be the biggest threat to the state's economy in the next 10 years -- a looming shortage of skilled workers. Minnesota is not positioned to replace college-educated baby boomers as they retire in the next decade -- let alone meet employers' additional workforce demands. Already in 2007, the state Chamber of Commerce's annual Grow Minnesota! employer survey said that "worker shortages are being reported statewide."

That's not the whole picture, either. Research at the University of Minnesota contributes to economic strength. So do natural resources, cultural amenities and, increasingly, sustainable, affordable energy and transportation, all of which can be a magnet for the talent a knowledge-based economy requires.

Pawlenty's concern about competitiveness is well-placed. But a too-narrow view of the problem won't produce the most effective strategy for solving it. A more comprehensive study is in order.

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