Helping business by cutting taxes? Not so fast, some governors say

As the Colorado Legislature struggles not only with writing a budget but even with agreeing how much money is available to budget with, Governor John Hickenlooper prepares to deliver his own budget vision this week.

Hickenlooper has said all along that raising taxes is not an option and speculation is rampant that huge cuts for K-12 education and public colleges and universities loom.

Against that backdrop, The Washington Post reported Sunday that cutting taxes at the expense of schools and roads can doom a state to further economic degradation.

The Post even quotes our own Hickenlooper:

“We … hope that every bill you consider passing will be viewed through the lens of its impact on our economic growth,” Colorado Democratic Gov. John Hickenlooper told lawmakers in his State of the State address, sounding a theme many governors share. “This doesn’t mean we compromise our standards or put our land, air or water at risk, but it does mean that we’ll keep a fierce and even relentless focus on jobs.”

Whether they can hold to that promise will become clearer in the coming months as governors release their new budget proposals.

But there’s a catch to the anti-tax, pro-business rhetoric: Businesses consider a range of factors when deciding where to locate, including the quality of schools, roads and programs that rely on a certain level of public spending and regulation. And evidence suggests there is little correlation between a state’s tax rate and its overall economic health.

“Concerns about taxes are overstated,” said Matt Murray, a professor of economics at the University of Tennessee who studies state finance. “Labor costs, K-12 education and infrastructure availability are all part of a good business climate. And you can’t have those without some degree of taxation.”

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About the Author

Scot Kersgaard

Scot Kersgaard has been managing editor of a political newspaper, editor and co-owner of a ski town newspaper, executive editor of eight high-tech magazines (where he worked with current Apple CEO Tim Cook), deputy press secretary to a U.S. Senator, and an outdoors columnist at the Rocky Mountain News. He has an English degree from the University of Washington. He was awarded a fellowship to study internet journalism at the University of Maryland's Knight Center for Specialized Journalism. He was student body president in college. He spends his free time hiking and skiing.

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