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Laura Kalambokidis is an associate professor in the Department of Applied Economics and Extension economist.

With election over, now the hard budget work begins, U of M economist says

November 3, 2010

Over the past year, Minnesotans have heard a range of philosophies about how to fund government and balance the state’s budget. Now that the elections are over and the state is facing a nearly $6 billion deficit over these next two years, what fiscal tools are available to state government’s new leaders?

A University of Minnesota expert who can comment on Minnesota’s budget situation and taxes is:

Laura Kalambokidis, associate professor in the Department of Applied Economics and Extension economist

Kalambokidis expects policymakers to take a look at the state sales tax. “Minnesota does not tax a lot of services, and over time, the state’s economy has become more of a service economy,” she says. “So more of the consumer dollar is going toward purchasing services rather than tangible goods, and we exempt a lot of those things. That has resulted over time in an erosion of our sales tax base.”

Kalambokidis says business taxes matter, and they matter in the sense that they're a cost imposed on the business. “If you lower their costs, they might react by investing more, by hiring more people.”

However, business taxes tend not to be the most important thing for most businesses. “Businesses are also considering infrastructure and the quality of the workforce in place,” she says. “So there also are limits to what the state can do, in terms of stimulating the economy by lowering business taxes because unlike the federal government, the state has to balance its budget over the biennium.”

Kalambokidis’s current research interests include analysis of federal and state taxation of businesses, consumption taxation, tax reform and local fiscal impact models.

To interview Kalambokidis, contact Jeff Falk, University News Service, jfalk@umn.edu or (612) 626-1720.

Expert Alert is a service provided by the University News Service. Delivered regularly, Expert Alert is designed to connect university experts to today's breaking news and current events. For an archive and other useful media services, visit www.unews.umn.edu. Views expressed by experts do not represent the views of the University of Minnesota.

Tags: College of Food, Agricultural and Natural Resource Sciences, Extension

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