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TAX FREE ZONES:
Twilight of the Free Market Economy

April 25, 2003

TAX FREE ZONES:
Twilight of the Free Market Economy
By Michael J. Chapman
Maple River Education Coalition

Is a state-planned economy coming to Minnesota? The answer is "yes," if so-called "tax-free" zones pass in the coming weeks (HF3 & SF 496). They are on a roll in St. Paul because legislators have been bamboozled into believing these bills create tax-free geographic areas to help economically distressed rural Minnesota. The truth is, Tax Free Zones are NOT "tax-free" and they are NOT really "zones."

Instead, these bills create TWILIGHT ZONES of government economic planning - complete with government-preferred industries and government-chosen businesses that are required to meet certain government-defined "qualifications." Couple this scheme with schools restructured around government-approved "career clusters" to meet local business labor needs, and you have the formula for creating, what has been called, "sustainable communities." (More about that later.)

GOVERNMENT PICKING WINNERS AND LOSERS
So-called "Tax Free Zones" are really about "government picking winners and losers." Senatorís Bakk and Higgins admitted it during testimony before the Jobs Committee! No kidding! They actually used those words! Furthermore, when we met with the governorís point man on Tax-Free Zones, he went so far as to say, "so whatís wrong with government picking winners and losers? Government does it all the time."

Welcome to the Twilight Zone, where "picking winners and losers" means ending free-market competition! To "WIN" tax-free status, a business must "QUALIFY" by meeting a set of standards determined by an appointed bureaucrat. Businesses that donít "qualify," (or otherwise choose to remain free), are left to pick up the tab for the "winners" and then figure out how to compete with these newly chosen government-subsidized business.

"What?!" you ask; "Donít ALL businesses get the same tax-breaks within these distressed areas?" NOPE! In fact, EVEN IF your business meets the qualifications, and you happen to be next door to your "tax-free" competitor, you arenít guaranteed admission into the club. You see, the bill gives the bureaucracy power to make up the rules as the game progresses. They can even make the TWILIGHT ZONE jump over your building! Itís like playing Chess against an opponent whoís every piece is a queen.

A legitimate tax-free zone would be a clearly defined geographic area in which any business, or any business within a specified industry (such as manufacturing), benefits equally. That is, everyone gets to compete on the same terms, on the same field of play; and government does not get to pick individual winners and losers!

WHEN IS A "TAX-FREE ZONE" REALLY THE "TWILIGHT ZONE?"
1. when a single appointed state commissioner decides WHICH businesses and property are individually anointed for success through extraordinarily lucrative tax and investment deals [Section 18, Subdivision 1 (a)];

2. when the anointed 5,000 acres areas are "noncontiguous", that is, geographically unconnected. [Section 16, Subdivision 2];

3. when a single appointed state commissioner has full authority to modify the plan to meet unspecified state "objectives" [Section 18, Subdivision 1, (c)];

4. When the anointed business must fit into a [government defined] regional economic plan. [Section 18, Subdivision 3, (5)];

5. when the anointed business must agree to "any other terms the commissioner determines appropriate" [Section 14, Subdivision 11(b)(2)(iii)];

6. when the anointed business must "annually report to the commissioner on its progress in meeting zone performance goals" [Section 24, Subdivision 1].

7. when the anointed business loses its tax free status if the appointed commissioner determines it is not meeting its "performance goals" [Section 24, Subdivision 3]. [The state is in a position to exert tremendous control over those businesses.]

8. when the anointed business must be supported by other business groups [Section 15(b)(2)];

9. when the anointed business must commit to government-defined "high-paying" jobs. [Section 19, Subdivision 3((9)]. [Is this a new minimum wage?];

10. when the anointed business must be part of a social, economic, health, human services and employment plan [Section 15(b)(4)].

CREATING "SUSTAINABLE COMMUNITIES:"
These "Twilight Zones" are actually part of the leftistsí UTOPIAN DREAM to build, what they call, "SUSTAINABLE COMMUNITIES." In these utopian villages, economic forecasters (government planners) decide which industries to target for regional and local areas, then offer subsidies and incentives to attract their preferred businesses.

What these chosen businesses havenít figured out yet, is that once the carrots run out, the stick quickly follows. When a business enters the twilight-zone, it is held accountable to the state planners "performance targets," which include "Sustainable Family Incomes." ("Putting it all Together" p. B-i)

To meet the labor "demand" within the village factory, schools are restructured around "career-clusters" (now called "smaller learning communities) to "supply" the job training. This is the new meaning of "supply and demand" under the "new economy."

The central committee meant to oversee the system is called "The Governors Workforce Development Council" (GWDC). In 1998, passage of the Workforce Investment Act (WIA) forced every state to create a GWDC. Minnesotaís GWDC 2003 Report to the Legislature explains they are to "develop a long-term economic strategy that identifies the state's key assets and builds on those assets through FOCUSED ECONOMIC DEVELOPMENT and CONCURRENT WORKFORCE TRAINING efforts to support that economic growth." ("Preeminence Minnesota," p. 8, emphasis added) [Note: The footnote directly links "economic clustering" to the "tax-free zones initiated by Governor Pawlenty."]

Regional planning boards, in turn, are responsible to ensure that local economic plans align with the state economic goals. [See "Putting It All Together"]

WIA required that both the GWDC, and the regional economic planning boards consist of various group representation with a majority being from businesses. Keep in mind, however, NONE of these groups get to vote for their own representation. Each is filled with appointments from on high. These bills actually refer to them as "appointed representatives."

LINKING SCHOOL-TO-WORK WITH TAX-FREE ECONOMIC ZONES
The tax-free zones are directly linked to education, even within the language of the bill itself:

1. the local school district must support and be committed to the plan [Section 15(b)(2)];

2. other educational institutions must support and be committed to the plan [Section 15(b)(2)]; and

3. "qualifying" businesses must be linked to job training providers [Section 18, Subdivision 3, (7].

What do "tax free zones" have to do with education? Why must the local school district buy-in to the plan? And, why must businesses be linked to job-training providers? Minnesota Statutes answer that question, revealing that the GWDC has oversight authority to create a state-wide "School-to-Work System:"

"The GWDC is to establish...an INTEGRATED SEAMLESS SYSTEM for providing education, service-learning, and WORK SKILLS development services to learners and workers of all ages." [Minnesota Statute 268.665, Subd. 3(c)] ALSO:

"The GWDC is to advise the governor on...COORDINATING SERVICES...under applicable federal human resource programs...such as... (9) SCHOOL TO WORK Opportunity Act of 1994, Public Law Number 103-239." [Minnesota Statute 268.665, Subd. 3(b)(9)(3)]

According to the 2003 legislative report, the GWDC identifies its task as choosing the career skills "needed to grow our statewide economy." The report continues:

"And while some of these skills correlate to advanced education and training, some can be obtained at the PRIMARY and SECONDARY education levels. ...We could do more to help PREPARE and PLACE many HIGH SCHOOL students." (p.5-6. emphasis added)

In other words, the GWDC is tasked with planning the economy, picking the favored industries, and coordinating the job-training system, which includes "PRIMARY and SECONDARY" schools.

NEW ROLES FOR SCHOOLS AND BUSINESSES
In 1996, the Department of Children, Families, and Learning (DCFL) published "Making Connections; a School-to-Work Resource Guide" to explain the same plan from an educational perspective. The plan called for a "revolutionary restructuring" of our K-12 education system around "Career pathways for all students; and the elimination of the Ďgeneralí track" (p.31).

The same STW resource guide also laid down the revolutionary "new role for businesses":

"Look outside your company and change your view of your responsibilities for human resource development. Your OLD responsibilities were to select the best available applicants and to retain those you hired. Your NEW responsibilities must be to improve the way you ORGANIZE WORK and to DEVELOP THE HUMAN RESOURCES in your community your firm and your nation." (p.11, emphasis added)

The DCFL borrowed the above quotation from the "Secretaries Commission on Achieving Necessary Skills" (SCANS), under the US Department of Labor, the named source for Minnesotaís Profile of Learning. The document they site is called "SCANS: What Work Requires of School," written in 1991.

Making Connections revealed the "scope for planning" which included such goals as "Recruit and maintain support of employers...adopt work-based leaning curricula...individualize student work-site learning plans...support students in the workplace...and DEVELOP COMMUNITY ENTERPRISES." (p.37)

Making Connections justified restructuring the schools by lamenting how "two people must work in order to SUSTAIN an ACCEPTABLE standard of living." (p.15). It is NO coincidence that "Livable wages for entry level jobs" is a "performance target" for both "School-to-Work" and the governorís "tax-free zones." Another common target is to end what Making Connections referred to as "the Rural Brain Drain." (p.15) The solution, of course, is to keep rural students RURAL by training them ONLY for what is necessary to the local economy. The central planners get to define exactly what that means!

It is also no coincidence that Making Connections explained how the Governorís Workforce Development Council was part of the plan all along, even before the WIA mandate:

"The Governorís Workforce Development Council, created by EET and named in 1996, combines the former Education and Employment Transitions Council, Governorís Jobs Training Council, and Commission on National Community Service. The Council is jointly staffed by the Department of Economic Security and the Department of Children, Families & Learning. Its 32 members APPOINTED by the Governor include REPRESENTATIVES from business/industry, community-based organizations, education, labor, elected officials, and state department heads." (p.19)

Among this monolithic bureaucracyís stated goals is to "Balance learner and workforce needs" based on their ability to predict the future: "The system will be future-oriented and able to respond to shifting economic conditions." (p.19). In other words, the GWDC alone knows the future, and is better at responding to economic trends than the free-market!! Remember, the DCFLís STW Mission Statement reads:

"To create a seamless system of education and workforce preparation for all learners tied to the needs of a competitive economic marketplace."

Now you get an idea why the governorís current plan includes the creation of the Workforce and Economic Development Department. The purpose is NOT efficiency as so stated; the purpose is to consolidate power into the hands of fewer bureaucrats who will control the entire "seamless system."

TWILIGHT ZONE SUMMARY:
If the "tax-free zones" pass as written, the legislature will have turned the free-market economy on itís head. First, the state legislature will have unconstitutionally abdicated itís taxing authority to an appointed bureaucracy who will choose the winners and losers.

These planners will wield great power over the economy by affording it the ability to create the "common program measures" that "do not adequately exist as yet, but are currently being developed." (Preeminence, p.7)

Businesses in the Twilight Zone will be required to prove and annually report it meets the bureaucracyís "program measures" which include placement, wages, a good return on investment, customer satisfaction, and "other requirements" the planners may think up later.

If they fail to meet the state goals, they will be forced to repay in full two years of the tax benefits they previously received! The state economic planners have the power to turn "winners" into "losers."

CONCLUSION:
Planned economies have ALWAYS failed! Such systems destroy economies and are ripe for corruption. Just ask refugees to America why they left their nations. They will tell you that government officials picked the winners and losers and so made losers of them all! They will tell you how friends and relatives of state officials always got the plum deals. They will tell you how state-planning destroyed incentive, efficiency, productivity, and ultimately hope.

Ask those same refugees why they came to America. They will tell you they came for freedom; the chance to reap the rewards of personal sacrifice, resourcefulness, creativity and hard work. America, they will say, provides a level playing field free from government interference, where free-market competition offers hope for success regardless of oneís cultural or economic past.

The free market also allows entrepreneurs the freedom to react rapidly to unexpected changes in the economy, thus helping them avoid disaster. That resilience is due, in part, to the education system required for economic freedom. Education in America was never about preparing for work! It was about the maintenance of freedom. When all citizens are given a broad-based liberal arts academic education, they are prepared to deal with whatever the future brings.

In the Twilight Zone, however, government-planners predict the future and build their cities accordingly. They donít educate our children; they train them for work within their narrow vision of the future. It is blasphemous to suggest the planners might be wrong. But what if they are wrong? What if the planners choose the wrong industries? What if biotechnology goes the way of the dot-coms? What if some breakthrough eliminates the need for workers in a chosen industry? Then they will have trained our children to be unemployed!

Tax-Free Zones sound nice. We all want lower taxes and we DO need to do something to help attract businesses to depressed areas in rural Minnesota! Unfortunately, tax-free zones will do none of that. These zones represent the next step toward building the STW Seamless System, which will eventually destroy Americaís economy, let alone end our freedom.

PLEASE TAKE ACTION TO STOP THIS MADNESS!
Please call the governor, your state representative and your state senator.

Governor's phone number: 800-657-3717 or 651-296-3391 Contact your own elected legislators

THREE RELATED PROPOSALS:
There are an additional five 5,000 acres set aside for agricultural processing facilities in this bill and another 5,000 acres for biomedical technologies in another bill. The Senate also added five 5,000 acres for mining industries. All follow the same script. Other very generous tax investment provisions for these zones are tucked into another related bill, as well.

How much will this cost taxpayers? We've heard estimates from $1 million to $10 million. But that only covers one of the three related proposals. Most importantly, cost this year isn't the issue. The real goal for this year is to establish the infrastructure for the state planned economy. The money can come in later. Stay tuned.

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