Building Full Capacity Locals
Investing in K-12 public education pays
Three issues—Tax structures, Economic development policies and Funding for schools, known as TEF—need to be addressed to stimulate the Michigan economy.
Sound investment in K-12 education is critical to improving Michigan’s economic growth, Richard Sims, president of Nevada’s Sierra Institute on Applied Economics, told MEA Fall RA delegates in November.
Sims’ speech outlined a bold economic vision called TEF—which calls for changing tax structures, economic development policies and funding for schools—and why we must invest more in schools to stimulate growth in the knowledge- and information-based economy of the 21st century.
“Investing in public education is sound economic policy,” Sims said. “Every time you spend a dollar on education, it helps the economy.”
High growth, high taxes
Sims poked holes in the notion that so-called business friendly states—where businesses routinely receive tax abatements and incentives—promote the greatest economic growth.
“States with higher taxes have tended to grow faster than low-tax states,” Sims said.
Only seven of the top 25 states ranked as business-tax friendly grew as fast as the U.S. average in economic growth. Only two of the top-ranked states were in the top 10 economic growth states.
In fact, seven of the top-ranked states were among the 10 slowest economic growth states, Sims said.
States need to reconsider their tax policies, the economist said.
“In general, states with high economic growth have relatively higher taxes,” Sims said.
Greatest tax burden on poorest
In Michigan, the heaviest tax burden falls on those with the least ability to pay. The state’s poorest residents pay $13.30 per $100 of personal income while the wealthiest residents pay just $5.
“Your tax system is designed to capture funds from middle and lower income levels,” Sims said. “The tax burden is shifting to lower household income people, and the money just isn’t there.
“We’re relying too much on the sales tax, a regressive form of taxation that falls more heavily on low-income taxpayers. We need to shift more of the tax burden toward upper income taxpayers and the business sector.
“You have a Model A tax system in a Ferrari economy.”
Current economic development policies, like current tax policies, prevent us from achieving adequate funding for schools, Sims said.
Tax incentives and abatements used liberally to attract businesses cost states more than $50 billion annually. The education community often has no say in decisions on tax incentives even though the revenue loss often comes directly at the expense of education.
Education investment creates more jobs
Dollar for dollar, investing in K-12 public education will create more jobs than would an equal amount in tax cuts or spending on any other major sector in the economy.
According to Sims, in a typical state, a 2 percent public education investment increase generates 3,900 new jobs and $92 million in new personal income. An equal tax cut generates only 1,500 new jobs and $41 million in new personal income, he said.
Low taxes are not the key to creating jobs and income in a state. With low taxes come low levels of public services. People want and expect high levels of public services, many of which are crucial to economic growth and development.
While businesses and individuals certainly care about taxes, their top considerations for locating in a community are“quality of education, quality of life and environmental quality,” Sims said.
“Workers are moving to places where the quality of life is better, and where taxes are higher,” he said.
Quality workforce important
The top priority for business is not low taxes, but the ability to attract a quality workforce, Sims said.
“Labor is a product of education,” he said.“You can’t have a good workforce without a good education system. And that’s where you (MEA members) come in.
“You help produce the workforce of tomorrow. You start with a young student and your efforts over time help make that individual into the most productive employee possible.”
Sims urged MEA members to promote the TEF idea. “You have to be leaders on this. You have to educate, advocate, convince and persuade because you want your students to have the option of living and working in Michigan. Otherwise, they’ll be residents of other states.”
As part of MEA’s Building Full Capacity Locals initiative, plans are being made for an intensive two-day TEF training for interested local leaders and staff. Details will be announced later. To learn more about TEF, visit www.mymea.org.