Read

Taxes, Growth and the Midwest

By
Learn more about Michael McMahan.
Michael McMahan
Former Vice President, Development
George W. Bush Presidential Center

In September, against the backdrop of state fiscal shortfalls and a bitter teachers’ union strike, the George W. Bush Institute continued...

Tax Competition & 4% Growth In September, against the backdrop of state fiscal shortfalls and a bitter teachers’ union strike, the George W. Bush Institute continued its investigation of growth and tax policies in the unofficial capital of the Midwest — Chicago, Illinois.  Headlined by Governor Mitch Daniels of Indiana, and featuring appearances by Margaret Spellings, David Booth, and Jimmy John Liautaud, two key themes emerged from the experts — tax uncertainty and inefficient government spending. American businesses and citizens need tax certainty. Whether putting together a five-year business forecast or managing a 401K retirement plan, a broad-based and long-term tax policy with low rates provides the stability and certainty that entrepreneurs and businesses need to invest and expand with confidence. As Bill Little, Chairman of the National Chamber Foundation posited, “Businesses learn to accommodate costs, and taxes are one cost. They work around it. They find a way. They price their product accordingly, whatever it might be, but the uncertainty is an enormous stifler of progress.” Dr. Michael Hicks, a professor of economics at Ball State University, went further in describing the danger of tax uncertainty: “I’m talking about bad uncertainty, and I think about the things like a shadow tax.” Hicks continued by comparing the extent of the problem Illinois faces vis-à-vis Indiana, saying: “Many people would be astonished. The unfunded liability for the city of Chicago is about $36,000 per resident. It’s about $1,800 per resident in Indiana.” Tax uncertainty at both the federal and state levels is holding back growth, but uncertainty is not the only problem. Government waste of tax dollars is making businesses and citizens uneasy, and they are starting to do something about it. Jimmy John Liautaud, the founder of Jimmy John’s Gourmet Sandwiches, told the crowd he is not only moving his family to Florida to escape the government waste of his personal tax dollars, he is also considering moving his company’s headquarters from Champaign, Illinois, to either Indiana or Texas next year due to the great waste of tax dollars in Illinois.  Mr. Liautaud explained he didn’t mind paying taxes, but “what I mind is how they spend the tax. I would stay, but the way they spend the taxes is what’s really driving me away.” With all the political rhetoric pitting the ‘haves’ versus the ’have nots,’ it is refreshing to hear a successful businessman discuss how the issue is government wastefulness, and not who is paying a fair share. America needs a plan forward. Regardless of the outcome at the polls on November 6, the same tax uncertainties, government inefficiencies, and looming deficits will exist on November 7. Washington needs to come together and fix these problems. It’s the only way to get the economy back on a path of high growth and prosperity for all. This post was written by Michael McMahan, Program Manager for The 4% Growth Project at the George W. Bush Institute