Most states and municipalities that lose business in spite of offering companies tax breaks walk away, but one town is fighting back. (Story in today’s NYT.) Point: In a competitive global environment, ……tax breaks can’t trump the adoption of competitive tax and regulation policies relative to those overseas, and as a result, states’ and cities’ “economic development bureaus” that construct tax break strategies to lure and keep business are taking a huge risk. A much better strategy is to promote tax cuts across the board–not merely for the politically well-connected (which is a recipe for division). The long run benefits of such policies are huge, because they weaken the redistributive ethic while attracting capital and labor that would now be relatively more secure and productive.
Source link: http://blog.mises.org/2624/when-tax-break-strategies-go-bust/
When Tax Break Strategies Go Bust
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Iowa is the same state that sent letters to college graduates who left the state for greener pastures, begging them to come back.
“The Iowa state government, for example, has found it necessary to attempt to reverse the outflow of Iowans to other states. Approximately 60 percent of graduates from Iowa’s colleges and universities move to other states, leaving Iowa taxpayers in the unenviable position of subsidizing the economic well-being of other states at enormous expense. Recently, the Iowa state government mailed 215,000 letters to graduates of Iowa colleges and universities in a largely futile attempt to convince them to return to the state that educated them. Iowa state government has also stepped up efforts to bring in skilled immigrants from overseas to compensate for the “brain drain” out of the state.9 Reflective of this lack of opportunity for graduates, Iowa’s per capita income growth substantially underperformed the national average during the 1990s.10 States with flat and declining populations face relative economic stagnation as people move to more dynamic parts of the country.”
From “The Tax Man and the Moving Van”
http://goldwaterinstitute.org/pdf/materials/444.pdf
I swear that’s the most obvious thing you can ever think of… Cut taxes for everyone not just the well-connect and everyone will prosper.
But no, leave it to the stupid state to never figure anything out properly.
The article makes it sound like paying taxes is patriotic. Give me a break. They want me to smile as they rape me? Maybe if taxes were voluntary they could say it’s patriotic to give. But it’s not patriotic to smile as they take.
Maytag left town to stay alive. They got a better deal elsewhere, and now Illinois is angry and ungrateful for their time hosting Maytag (all those jobs be damned). Maytag has a responsibility to seek out efficiency, even if that conflicts with the holy American dogma that America is the greatest at all things in all ways. Reality disagrees. If Maytag has to go to Mexico because it will allow them to cut prices or make a better product for the same price or keep more money in their pocket instead of the taxman’s, SO BE IT. You can’t ask someone to harm themselves so you can benefit, which is what asking them to stay in Illinois (out of pity) is.
Slightly Offtopic: The root cause of all this is the government. The problem isn’t that the government’s stupid (they are, of course), it’s that they’re so addicted to spending that they have to extort money from everybody they can catch in order to finance their own whims and buy themselves another election. Their regulation and taxation force inefficiencies into a system that is fragile enough without them.
If the government spending junkies could stop borrowing money to finance their wars on drugs, terrorism, intelligence, or whatever they’re against today, they could make a flat tax across the board, which would encourage success (instead of punishing it to the point where people hide their success as much as possible from the government). I dislike Bill Gates and the somewhat dishonest way he’s run his company, but really, the guy’s NEVER going to use ten billion dollars of health care and his kids are going to private schools. Why are we taxing him so much?
If the government killed their spending habit they could kill the income tax completely — but the big two parties are both hooked, and so this would never happen — unless the Libertarians get in. We can only hope (and vote).
I’m still upset over Tulsa’s passage of the comprehensive Vision 2025 economic plan, which included tax breaks for American Airlines and a new arena downtown.
But the culprit is not just government, but the majority of people who vote for such hair-brained schemes. They do so because they perceive government to be largely benign, and also because their economic understanding is so lacking.
On the North Carolina ballot is a “self funding bond” act. Sorry, I forgot the exact name.
Here’s how it works: Politicians decide how much more tax money they’re going to rake in if they do “something”. Bonds are then issued to pay for this “something”, to be paid back with the new tax revenue.
Since this bond act has no effect on the present tax payer (so they say), this isn’t a tax. Towns, counties, whoever, would be able to issue these at will.
Of course, if the “something” doesn’t actually generate any new tax monies, the bonds must be paid anyway since the money has already been spent.
But it’s not like anything ever goes wrong. Politicians are little demi-gods who can predict the future. Just look at our wonderful ever-expanding “new economy”.
From Matt:
“If the government killed their spending habit they could kill the income tax completely — but the big two parties are both hooked, and so this would never happen — unless the Libertarians get in. We can only hope (and vote).”
That will never happen. The government has literally become a perceived extension of man’s ability to attain ends. As long as the government exists it will seek to maximize wealth expropriation and regulation in order to maximize the psychic wealth of voting constituents. Hence, the Libertarian platform is unrealistic for politicians to get elected on (there are too many people who perceive the government as a means to attain ends). Hence, minarchy is a pipe dream.
Democracy must be done away with, and undermined from outside the system. First items on the agenda are taking back the medium of exchange, and of de-legitimizing democracy. De-legitmizing democracy entails getting people to understand that the government is not a legitimate method in which to acquire wealth (which leads to private property expropriation in order to fund transfer payments) or attain ends (which leads to regulation and growth of government programs). As long as perceive perceive the government as a legitimate means to attain ends, they will seek to maximize the government’s ability to attain those ends for them. It is basically an all or nothing situation.
Oops,
“As long as perceive perceive the government as a legitimate means to attain ends, they will seek to maximize the government’s ability to attain those ends for them.”
That was supposed to be “people perceive.”
Great post, Steven.
“Democracy must be done away with, and undermined from outside the system. First items on the agenda are taking back the medium of exchange, and of de-legitimizing democracy.”
Sounds good, but exactly *how* do we do this? Yes, yes, the “educational phase” is far from over. I may be an anarcho-capitalist, but I’m not against being involved in the LP as long as it’s not the only thing I’m doing. Politics is generally a reflection, a reaction to society and culture. If and when we succeed in changing the culture as you suggest, then Libertarians will be elected and can do dramatic things to government, including the facilitation from minarchy to anarchy.
I think a pragmatic approach is to own gold or gold mining equities and keep them in the most tax-sheltered place you can think of, acquire practical real-world skills that will always be in demand, make yourself and your family reasonably comfortable, and simply sit back and watch the system collapse of its own accord. It may not even happen in your lifetime. There is no need to get into endless Libertarian arguments with people, other than for the sheer entertainment value. I don’t see any reason to vote, or get involved in political parties. If you care about what happens after you’re gone, make sure that your children or protegés have a good understanding of Austrian economics and Libertarian ideas.
Anyone have a better suggestion?
“Anyone have a better suggestion?”
Yeah, undermining the current monetary system by offering people a much better private commodity (gold, silver, platinum) backed monetary system.
GoldMoney is based in Jersey (the island in the English Channel, not New Jersey
which is pretty well tax-sheltered. The digital gold currencies will (hopefully) much improve when the Chaum blinding patent expires (next year?); then we can do real digital cash — as untraceable as gold coins.
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