The Minnesota Free Market Institute Weekly Update
Friday, May 1, 2009

In This Issue
Tax Cut Rally is this Saturday May 2nd!
Tax Those People!
Ought Implies Can
Must Reads
In Case You Missed it from the Minnesota Free Market Institute
Budget Hawks 3: The Final Showdown is May 14

Tax Cut Rally is this Saturday May 2nd!

If you were one of the working stiffs who had to miss the Tea Party last month, you have a second chance to show up and make your voice heard at the Annual Tax Cut Rally this Saturday.  The Rally is from 11am-4pm on the capitol grounds. There will be plenty to see and do, from an impressive line up of speakers, to a book fair and there will be many information booths to learn about the issues.  If you couldn’t make the Tea Party, you also missed an opportunity to sign the Tea Party Petition.  We will have the petition at the Minnesota Free Market Institute booth so stop by and add your name to the list! Also, don’t forget to bring a canned food contribution for metro area food shelves, sponsored by Hope for the City. Pat Anderson is President of the Minnesota Free Market Institute

Tax Those People!

In 2005, the U.S. Supreme Court ruled, in case of Kelo v. New London, that the U.S. Constitution is no bar to cities seizing property from one private landowner and giving it to another. Following that decision, a number of states changed their laws to restrict the powers of eminent domain. Minnesota was one of those states, though it allowed existing projects to proceed. One of those was the Cedar Grove project in the south metro suburb of Eagan.

In the words of mayor Mike Maguire, who recently wrote an op-ed on the subject,

“The area went into a steady decline over two decades. Restaurants became engine repair shops, a gas station became a truck rental facility, a grocery store became a paintball range and the old mall housed fewer and fewer shops.”

My first thought upon reading this was “what’s wrong with engine repair shops?” In recent years, some members of the city council have complained that the city’s northern section has “too many” trucking companies and not enough “quality” development.

City government has invested seven years in an effort to redo the area. It used its power of eminent domain to forcibly acquire properties in the area. Together with a commercial developer and community activists, it developed grand plans. In other words, it substituted the political process for the free market.

During these seven years, the city has incurred carrying costs for the project, which it had hoped would someday pay off. But now, thanks to the tanking of the economy, those plans are had to be altered, once again.

Read more here

John La Plante is a Policy Fellow at the Minnesota Free Market Institute.

Ought Implies Can

Last Friday I published a column  in the Pioneer Press pointing out the misrepresentation of the Minnesota Tax Incidence Study that occurs when individuals simply quote without context the study finding that, “the wealthiest Minnesotans pay only 9 percent of their income in state and local taxes while middle-income wage-earners pay 12 percent.” My final point was, even accepting “fairness” as an overriding objective for the Minnesota Tax system, the progressive solution of higher state income taxes actually increases, not decreases, the pre-tax income gap. In other words, the progressive “ethical” approach to the tax system conflicts with the reality of economic principle.

Subsequent to writing the column I came across an article, which I highly recommend, by St. Lawrenece University economics professor Steven Horwitz. In his piece “Ought Implies Can ,”  Horwitz tackles head on the common objection to the free market that it ignores ethical considerations. In particular critics of the free market, like the folks at Growth & Justice, argue that there are many things we “ought” to do that they believe will make people’s lives better. Increasing the income tax on high-income earners is but one example.

The problem with progressive “oughts,” argues Horwitz, is that when making policy, ought implies can. Can raising the income tax on high wage earners actually achieve the objective of decreasing the income gap between “the rich” and the rest of us? If not, what is the point?

“Ethicists can imagine all kinds of schemes to remedy perceived social ills, but none of the aspiring benefactors can afford to ignore economic analysis,” writes Horowitz. “We always have to ask whether it’s humanly possible to do what the ethicists say we ought. To say we ought to do something we cannot do, in the sense that it won’t achieve our end, is to engage in a pointless exercise. If we cannot do it, to say that we ought to is to command the impossible.”

Insisting on attempting the impossible leads to bad public policy – policy that doesn’t accomplish its objectives, that distorts the market and that drains wealth from the private sector.

As I argue in my column, there are tradeoffs between a tax system based on economic principle, tax burden and efficiency objectives and a tax system motivated by ethical, distributional effects and equity objectives. The public would be better served if progressives would define, debate and defend those trade offs rather than perpetually proposing “ethical” tax schemes that ferment bad economic policy and cannot achieve their ethical ends and promoting them with misleading sound bites.

Craig Westover is a Senior Policy Fellow at the Minnesota Free Market Institute

Must Reads

Arthur C. Brooks. The Real Culture War is Over CapitalismWall Street Journal.
Brooks argues that there are lessons that we should draw from the Tea Parties. Most importantly, that there is a new movement brewing which he calls “‘ethical populism.’ The protesters are homeowners who didn’t walk away from their mortgages, small business owners who don’t want corporate welfare and bankers who kept their heads during the frenzy and don’t need bailouts. They were the people who were doing the important things right — and who are now watching elected politicians reward those who did the important things wrong. “

In Case You Missed It from the Minnesota Free Market Institute

Craig Westover
Craig Westover appeared on the Ron Rosenbaum program on KTLK on Thursday April 30.

John LaPlante

State House Call

King Banaian SCSU Scholars

Budget Hawks 3: The Final Showdown is May 14
Join us for the third event which is timed to coincide with the end of the legislative session on Thursday, May 14 from 5-8 PM at Trocaderos in Minneapolis. Cash bar but munchies will be provided.  See the flyer here for details on free parking and for more information about the event. Although it’s not required, you can RSVP on facebook here.

Notable Quotes
If you think health care is expensive now, wait until you see what it costs when it’s free! — P.J. O’Rourke

In general, the art of government consists of taking as much money as possible from one party of the citizens to give to the other. –Voltaire (1764)

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policy that limits government involvement in individual affairs and
promotes competition and consumer choice. By analyzing the actions of
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Minnesota Free Market Institute creates policy options for the future.
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