Pass tax reform or move on, N.D. senator says at Minneapolis Fed conference
Congress should tackle tax reform or move on to something else, Sen. Heidi Heitkamp, the Democratic senator from North Dakota whose crossover appeal has brought warm attention from President Donald Trump, said in Minneapolis Tuesday.
"Either do it or shut up," Heitkamp said at a conference on the regional economy hosted by the Federal Reserve Bank of Minneapolis. "Uncertainty has delayed investment."
A former state tax commissioner, she told the audience of economists and business executives she learned the most important thing government officials and agencies can do for economic growth is provide businesses a climate of predictability.
Heitkamp has expressed support for a tax code overhaul in broad terms. While she hasn't specifically endorsed Trump's tax proposal, she has better ties than most Democratic officials with the White House. When he traveled to North Dakota last month, Trump invited her to fly along and appear on stage with him. "Senator Heitkamp. Everyone's saying: 'What's she doing up here?' " Trump said at the Sept. 6 event in Mandan, N.D. "But I'll tell you what: Good woman, and I think we'll have your support — I hope we'll have your support."
Asked by Minneapolis Fed President Neel Kashkari to handicap the chances that tax reform will emerge from the current Congress, Heitkamp declined but suggested that the intense focus in Washington on delivering big changes may itself be an obstacle to making them happen.
"There is this idea you have to run to bright shiny objects," Heitkamp said, referring to major legislation. "What we should be doing is creating efficiencies."
In her talk at the Minneapolis Fed, she described the complexity of changing the tax code. Many voters tell her they want Congress to close loopholes but, when confronted with major ones such as the mortgage interest deduction or state tax deduction, say that those should be kept. "That's an illustration of how difficult it is to have a meaningful discussion about tax reform," she said.
She said she would like to see tax legislation that "figures out the discrepancy" in tax rates on earned income and unearned income. "Why is it that if you go to work every day you pay a higher rate than if you don't go to work?" Heitkamp asked.
Much of the conference focused on growth limits seen in the six states — Minnesota, Montana, the Dakotas and parts of Wisconsin and Michigan — in which the Minneapolis Fed oversees banking. In all, labor force growth has slowed, unemployment is low and jobs are hard to fill, putting downward pressure on growth.
"When you have very slow labor force growth and you want economic growth, the key is going to be productivity. If we have smaller numbers of workers, we need those workers producing more per worker," said Minnesota's state economist Laura Kalambokidis. Measured productivity growth has been low nationwide. "The question is can we kick that up a notch?"
She noted that prospective restrictions on immigration could put more pressure on the state's labor force. The outflow of Minnesotans to other states is offset by inflows of immigrants, creating the population expansion that helps drive the economy.
"International migrants are key to Minnesota's success going forward. That's where the population growth is," she said. "National policies that put that at risk are a risk for our labor market. In addition, education disparities and health disparities that put those communities at risk is a risk for us."