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Gov. Dayton and DFL announce jobs bill

by Eric Ferguson on January 12, 2012

UPDATE

Gov. Dayton and DFL legislative leaders announced a new jobs bill this afternoon. Here is the press release on the governor’s office web site, and here are details of the proposal.

The Uptake has clips of the announcement:

Their proposals include:

  • A $775 million bonding bill
  • Business tax credits for hiring
  • Applying sales tax to internet purchases
  • Expanded worker training programs
    The bonding bill for infrastructure work is the biggest part. Just so there’s no assumption everyone knows this, bonding means this won’t be paid for through an appropriation, so there isn’t an all-at-once outlay of $750 million. The state will issue bonds, which can take as long as 20 years to mature. It’s a way of spreading the cost of projects over their likely useful lives (obviously doesn’t apply to tobacco bonds, which are for throwing away part of our tobacco settlement to avoid raising taxes on rich people). Bonding is usually done in the non-budget session, which is in even-numbered years, so it would be normal to bond this year, and that was a Republican objection to the governor’s bonding proposal last year. The governor wanted the extra bonding bill both to attack the backlog of maintenance, and to create jobs as quickly as possible.

    This new bill might have to be done anyway, due to the need to get the work done, even if the economy were going great and unemployed workers were hard to find. As it happens, while admittedly unemployment has dropped considerably, it’s still historically high. These jobs will mostly be construction which, as Senate Minority Leader Tom Bakk mentioned in the Uptake video, is still in a depression, so the jobs go where they’re needed most. That’s why this is being presented as a jobs bill, not a “fix our stuff being it breaks” bill.

    It also happens that interest rates are at record lows, which means the state’s borrowing costs have never been lower. It may still be the case that construction bids are coming in below expectations thanks to the dearth of work, as was the case a couple years ago, so the state can both build and borrow cheaply. Combined with the need to get work done and the high number of unemployed people, this is an ideal time to borrow heavily and fix everything. Combined with the Capitol Preservation Commission’s proposed $241 million in capitol renovations, and $300 million from the state for a new stadium, that’s about $1.3 billion for construction work, which will create a lot of jobs. Hopefully, once legislative Republicans are done fainting, they’ll remember that they’re supposed to stop the state’s bridges, schools, and capitol from falling apart.

    The proposed internet sales tax has been looked at by probably every state since the first web retailer made a sale and didn’t have to charge sales tax. Bricks and mortar retailers (businesses that sell to customers who enter the place of business, not necessarily businesses that sell bricks and mortar — and why hasn’t my order from mortar.com arrived yet?) have complained for a long time about the price advantage web retailers have, and they’re convinced browsers look at products in the store and take up staff time, then buy online to avoid tax. I don’t know if that’s common. Web retailers might feel the advantage of being able to see and feel the merchandise and take it home right away makes up for collecting sales tax. I’m sure they don’t want the compliance cost.

    I do know that the sales tax is regressive, that low income people are the least likely to have internet access, and therefore they’re less likely to buy online and avoid the sales tax. Spreading the tax burden to web retailers might allow (not yet, since this tax would pay for the job creation tax credit, etc., but eventually) the overall tax rate to be lowered, and make it less regressive. There’s no way to know how much less regressive, but something.

    The one part I’m skeptical about it the tax credit for hiring new employees. That might appeal to Republicans, but how would we be able to ensure the credit is just for hiring that would not otherwise have taken place? Would we be rewarding employers for hiring they would have done anyway, but now we’re subsidizing it? I’d prefer to see the state do something more direct, like add another project to the bonding bill, or hire people directly to work for the state. Maybe repay the school shift and save borrowing costs for the schools. If it’s there to get Republican support, I can accept a compromise, but that assumes the other parts of the bill go through too, and not the employer credit alone. I can easily imagine the Republicans passing just the part they fully agree with.

    h/t dan.burns for his Quick Hit linking to this Daily Kos post on this sort of tax credit for hiring and similar business incentives. A report from Good Jobs First indicates these incentives are as much corporate giveaway as incentive to hire.

    Good Jobs First makes sensible recommendations. Programs should all have quantifiable job-creation standards. They should have wage requirements designed to lift prevailing wages, not tied to a fixed level or the poverty rate. Companies should not be allowed to shift existing jobs from other facilities to qualify for the subsidies/incentives. The programs should require the companies to provide a package of benefits, including health-care coverage. Wages and benefits should apply to part-time and temporary as well as full-time, permanent workers.

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