FRIEDMAN: Business tax cuts aren't Democratic

June 2, 2012

Shaw FriedmanSome Indiana politicians and business leaders are calling for further cuts in the state’s corporate income tax. But any Democrat looking at state office or the Legislature needs to think twice before embracing Republican calls for yet more budget-busting cuts in corporate taxes as a way to spur job growth.

Not only is such a plan lousy politics, but the evidence is overwhelming that there are better ways to make Indiana attractive for economic development.

First the politics: Hoosiers, when polled, know there is a better, smarter way to grow jobs than simply cutting Indiana’s corporate tax rates, which only reduces much-needed tax revenue that pays for education. Indiana’s business tax climate is already among the 10 most favorable in the nation, according to the Tax Foundation. If taxes alone made the difference, we would be swimming in new jobs and prosperity, rather than awash in unemployment.

We’ve got the benefit of a statewide poll of likely fall voters conducted March 6–8 by the Benenson Group. Hoosiers simply aren’t falling for Republican trickle-down theory and neither should authentic Democrats who want to give voters a choice.

Fifty-seven percent of Hoosier voters polled said their view of the best way to create jobs was, “We should improve our schools and produce more skilled workers and engineers so companies will be able to hire the workers they need here.” Compare that with just 37 percent of Hoosiers polled who believe, “We should lower taxes and loosen government regulations that cut into business profits” as the way to increase jobs.

That’s right, Hoosier voters know that investing in education rather than slashing revenue needed to support schools is the way to go. Democrats need to give Hoosier voters credit and tailor our arguments and our campaigns accordingly.

The politics of pushing for more corporate tax cuts is lousy because the public understands that trickle-down doesn’t work. Democrats need to be ready to make the case on why there is a better way to accomplish economic development and job creation.

Tim Bartik, senior economist with the Upjohn Institute for Employment Research, says, “Corporate tax cuts don’t have a large enough impact on increasing wages for families.”

Indiana University economist Morton Marcus has consistently argued that the best plan for Indiana’s economic development is to invest in high-school-age people. As Marcus well states the case, public high schools, their students and their programs “can set the tone for life in many communities.” We can’t continue undervaluing education and we need to “prepare young people for adult responsibilities.”

The literature is there for any Democrat ready to articulate an alternative vision. Amlan Mitra, a professor at Purdue University-Calumet, says his research shows that “tax cuts and incentives are unlikely to attract businesses, stimulate economic activity and create jobs in a cost-effective way.” As he told the Merrillville Post-Tribune, “There is little proof that state and local taxes are major factors in business location decisions.” As Mitra makes clear, it’s important for elected officials to partner with education, “which is a major driver of economic development.”

The bottom line: No real Hoosier Democrat ought to buy into GOP claims that what is needed is simply more tax cuts for business. Repeating right-wing talking points accomplishes only three things—it helps turn right-wing GOP ideas into right-wing GOP realities, it legitimizes bad ideas, and it elects Republicans.

Advocating Republican-Lite policies not only disenchants our core voters, it won’t win us independents, either. Hoosiers want and deserve a real contrast and we Democrats have to be bold enough and smart enough to articulate a real, defined choice for voters.•


Friedman, a LaPorte attorney, served as legal counsel for the Indiana Democratic Party from 1999 to 2004. Send comments on this column to ibjedit@ibj.com.

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