Readers Write: Diversity and Willmar, 'Econ 101' and taxes

The recent column by Thomas L. Friedman of the New York Times about Willmar, Minn., leaders embracing diversity (Opinion Exchange, May 19) reminded me of a conversation that I had with my great-aunt two decades ago, when Latinos started to settle in her hometown of Willmar. "I hear some people complain about the Mexicans, but I don't go along with it," she said. "Although I don't really know any of them, I know that the Mexicans laugh when we laugh, and they cry when we cry."

My great aunt, the child of immigrants, had entered first grade speaking only Swedish. Consequently, she had firsthand perspective regarding some of the challenges faced by her new neighbors from south of the border. It's great to hear that in 2019, younger generations of Willmar residents have caught up with my late great aunt and are now embracing newcomers from around the globe.

St. Louis Park native Friedman's column "Would you like to see America? Visit Willmar" was published 15 years after former Star Tribune editorial writer Steve Berg highlighted the transformation of this beautiful Minnesota city ("Willmar and a central-city ward have more in common than you'd think," July 25, 2004). Steve had joined me on a trip to Willmar sponsored by the League of Minnesota Cities exchange program. We met community leaders committed to strengthening their business district, welcoming diversity, engaging the arts community and maintaining public services during challenging financial times.

Several weeks later, then-Mayor Les Heitke visited northeast Minneapolis. We faced many of the same challenges and opportunities on Central Avenue and in northeast Minneapolis. Since that time we also experienced a wonderful transformation of our community. I was reminded then as I am still reminded today that the dreams of cities of all sizes — urban, suburban and exurban — are remarkably similar. Let's celebrate our common aspirations rather than dwelling on the identity and tribal politics that only serve to divide us.

The writer was a member of the Minneapolis City Council from 1998 to 2009 and is co-chair of No Labels Minnesota.

In his May 19 column ("Econ 101 is suddenly, selectively conducive"), D.J. Tice argued that if Economics 101 teaches us that higher tariffs on foreign sellers are just passed along as higher costs to U.S. buyers, then we should just as easily see that higher taxes on businesses are passed along as higher costs to consumers or lower wages to employees. It is a convincing argument, backed up by a tax incidence analysis by Gov. Tim Walz's Revenue Department estimating that two-thirds or more of any business tax increase would be passed on to consumers and employees rather than subtracted from company profits.

What Tice failed to point out is the equally convincing Economics 101 reverse argument: Lower taxes on businesses are more likely to be added to company profits than passed along to consumers and employees. Additionally, the lower business tax must be paid for by reducing public services, increasing non-business taxes or spending public-money reserves, again burdening people more than businesses. Thus in either case, business taxes are unfair to the people, because a business can unfairly mitigate or capitalize on any tax changes at the people's expense. So policymakers should stop proposing corporate tax change as a fair way to serve public interests and focus instead on a fair (progressive) personal tax system that provides for the best-quality society our collective personal incomes can afford.

I would expand the line of thinking to include any and all costs of doing business. Every business competes in local, regional and/or international markets. If Minneapolis increases the minimum wage for workers and Plymouth does not, then Minneapolis businesses will lose sales to Plymouth competitors. If Minnesota increases its corporate income taxes and Wisconsin does not, then Minnesota businesses will lose sales to Wisconsin competitors. And if tariffs on Chinese products increase, then products built in Beijing will lose sales to products built in Baltimore. The vehicle for the process is higher consumer prices in the shorter term, resulting in product substitution in the longer term.

Readers of Tice's column about how gas tax increases are Econ-101-regressive would also be informed by reading Business section writer Lee Schafer's April 29 column "Fairness is built into the state's tax code: Gas tax wouldn't end that."

Schafer points out that the Minnesota Center for Fiscal Excellence rates Minnesota as having the most progressive income tax system in the nation. Now that the gas tax will not be increased this year, it should be noted that the North Star Policy Institute reports that the real purchasing power of the gas tax has declined by 36% since 2000. Our crumbling roads and bridges show it.

Tice finds it easy enough to cite Econ 101 as a condescending way to criticize the governor's tax proposal. But what fix would he recommend to address unmet needs with Republicans barking "no new taxes" while the top 0.001 percent are grossly undertaxed? How about ideas proposed by U.S. Sens. Elizabeth Warren and Bernie Sanders, such as taxing transactions on Wall Street?

Tice states that the "lesson of Economics 101 is that businesses do not pay taxes because businesses, after all, are not people, and only people pay taxes. To be sure, business owners — whether corporate stockholders or sole proprietors — technically are human beings, and they do pay taxes in the form of smaller profits."

That being the case, he and I are in agreement.

Tice apparently does not recognize that Econ 101 no longer exists. It has been replaced by a new set of economic principles. The new economics of the Citizens United ruling is that, apparently, businesses are people. Oh, how that changed our economics and our politics, and not for the better. He also doesn't realize the complaint isn't that businesses pass taxes on to their consumers — that's obvious — but that those same businesses do not pass tax cuts along to consumers in that same manner. The facts show the Trump tax cuts for businesses did not have that impact but were largely passed along to the owners, management and investors in those businesses. For the consumer, it was business as usual.