Taxes are the wrong focus for economic growth

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By Jack Markell
Friday, March 11, 2011

Two months ago, Wisconsin Gov. Scott Walker invited businesses in Illinois to "escape to Wisconsin" as a result of the recently enacted tax increases in Illinois.

Admittedly, I don't know whether Walker's offer has been effective. My own experience, though, as a business executive and as a governor, tells me that businesses are interested in a lot more than a low tax rate when they decide where to locate.

The debate in Wisconsin over whether workers should be allowed to collectively bargain has garnered most of the attention, yet Walker's attempt to woo Illinois businesses while cutting funding for Wisconsin's schools raises a fundamental question: What will drive economic growth?

First, a caveat: As a governor for two years in a state hit hard by the recession, I sympathize with all governors who are struggling to balance budgets. Flat revenue, soaring costs for Medicaid and increasing demand for other government services are a tough combination. So over the past two years, we in Delaware have implemented dozens of proposals to reduce spending. I've cut the state government workforce and endured mass protests, including impeachment signs, as a result of a pay cut I pushed through over huge opposition. Now I'm working with our state's unions to develop a plan to reduce health-care and pension spending by taxpayers.

My focus on the budget, though, has played second fiddle to what I believe is even more important - creating jobs. I've visited hundreds of businesses the past two years and always ask the same question: What can I do to facilitate their success?

The number of business leaders who asked me to lower their taxes can be counted on one hand. Perhaps that's because they recognize they get great value in Delaware already. But what I hear most from business leaders is that they want the government to continue to improve our schools, reduce the time it takes to issue permits and licenses, enhance our transportation infrastructure, protect our arts community, strengthen linkages between our institutions of higher education and local companies, and be responsive.

Don't get me wrong. Business leaders want to be in places where the taxes they pay are spent wisely. But they're more interested in things that will allow them to succeed in the marketplace.

That doesn't happen on its own. And as much as I, an MBA graduate from the University of Chicago, respect the value of the free market, I believe there is a role for government to play here.

This precise argument is playing out in states across the country and is, in fact, probably the most important part of the budget debate in Washington.

Certainly, we must get control of our nation's spending, deficits and debt. But doing so is not the ultimate job-creation strategy.

As one of the first employees at a small cellular phone start-up called Nextel, I gained firsthand experience in how a business grows from an idea to a company that, at its peak, employed many thousands. Taxes were the least of our concerns, but we did have a problem finding employees with the right skills.

President Obama has appropriately focused in recent months on the need to out-innovate other countries. But where will the innovation come from if we don't make necessary investments in federally funded research? Who will take innovation to market if we don't help millions of workers retool their skills with appropriate job training? How will we get these new goods to market cost-effectively if we don't improve our infrastructure? These are precisely the investments other nations are making. We must, too.

These, then, represent the key competing visions for our country's future. My money is on appropriate cutting coupled with investments in the factors that will lead to economic growth. We've never succeeded as a country by racing to the bottom, cutting the investments that matter the most. Now's not the time to start.

The writer, a Democrat, is governor of Delaware.


© 2011 The Washington Post Company

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