Taxes and mobility

A couple of interesting posts on taxes. First, from Donald Douglas of American Power:

Gov. Jerry Brown Won’t Ask for Income Tax Increase in 2011

Maybe he should hold off on tax increases altogether. Let the market work things out and continue to rationalize spending.

At LAT, “Gov. Brown to skip tax increase this year“:

A surge in revenue has prompted Gov. Jerry Brown to scale back his proposal for more taxes, even as his administration on Friday announced its intention to close 70 state parks.

Officials familiar with Brown’s plans said the revised budget he presents Monday will propose raising income tax rates on Californians for four years rather than the five he initially wanted. The higher rate would not take effect until 2012.

The governor will continue to push for a five-year extension of increases in sales taxes and vehicle fees that are due to expire by July 1, according to the officials, who spoke on the condition of anonymity because the plan has not been made public. Brown wants lawmakers to put some levies in place before July 1, to be ratified later by voters, the officials said.

And the second one, from Duffy of The Colossus of Rhodey:

Even Democrats concede economic reality in a crisis

We are continually told that taxes either don’t matter or they somehow grow the economy. This is nonsense on stilts and even the most hardened of Democrats know it. Rather, they use this “logic” as a fig leaf for their desire to take money from others to reward their cronies and spent it as they see fit.

Even Illinois which is Democrat down to dogcatcher is facing reality. Motorola is threatening to leave the state. The taxes are too high and the cost of doing business has made staying untenable. So what did Illinois do? They offered $100MM in tax breaks. One Hundred Million Dollars not to leave.

They have been forced to face the reality that they can only bleed so much from corporations before they leave. Motorola is not a small outfit and moving is going to be expensive. That said, I don’t think they’re bluffing. They’ve run the numbers and staying long term isn’t prudent.

Similarly, Sears the icon of Illinois is pulling up stakes. Think of what it says that the company with the most iconic tower in the midwest is thinking of leaving Illinois. How bad is the business climate? So bad, they’re considering New Jersey. They are also considering Texas which is unsurprising to anyone who’s been paying attention.

Taxes matter. Regulations matter. Capital flight is a reality. Not just from state to state but from country to country. Democrats ignore this reality over and over. Some of them are so brazen as to say “let them go”. That is beyond foolish. Delaware has the jobs it does by making a favorable business climate. Low corporate taxes, solid Court of Chancery and streamlined regulatory environment. Trying to bleed corporations for pet projects is unwise. Better to draw more businesses and ask less of them than to drain those who are here.

More at the link. But we’ve noted before the California business exodus and how taxes and the increased costs of doing business due to increasing regulations are nudging corporations to lower tax/lower cost states.

One thing has jumped out at me. Duffy noted two major corporations preparing to leave, or at least partially leave, Illinois due to increasing taxes. The point behind that is simple: corporations like Sears and Motorola might leave because they can leave. Governor Jerry Brown of California is simply delaying income tax increases, but the taxes he is considering are increased taxes on people who mostly lack the ability to pick up and leave. Dr Douglas is, for example, an associate professor of political science at Long Beach City College; for him to leave due to increased taxes would require him to find another tenured professorship at another college, not necessarily the easiest thing to do. Henry Whistler, the Iowa Liberal who lives in California — don’t ask me how that makes sense :) — spent a lot of time living poor in the Los Angeles area, but has now managed to establish himself in a growing career; he can pull up stakes and head back to the Hawkeye State, assuming that Mrs Whistler will agree, but that would be at the price of the career he finally got going.

But those wicked ol’ corporations, the ones so many of our friends on the left somehow see as the enemy, many of them do have the mobility to pull out of a higher-cost environment and settle down in a lower cost one.

Duffy continued:

When we were a manufacturing economy much of what they now believe was true. You could bleed companies like Ford. They had millions and millions of sunk costs in their factories and moving was nearly impossible. Those days are gone and are not coming back. New York City learned this the hard way which is why Jersey City looks the way it does now. Why do I work in Virginia instead of DC? Virginia got smart. They lured businesses away from the District with tax incentives and smarter regulation. They don’t call them the Beltway Bandits for nothing.

Maybe Jerry Brown figured that out, too, and that’s why his proposed tax increases — including the delayed-for-one-year income tax increases — are really aimed at the people who can’t just pick up and move.

3 Comments

  1. Don’t forget the Liar in Chief Barack Obama claimed his Porkulus plan would save Caterpillar jobs and the former Caterpillar CEO said that was not so. Caterpillar shed jobs and the former Caterpillar CEO gave the Liar in Chief Barack Obama a grade of “F”. The new CEO of Caterpillar said Obama’s words have improved for business — from a 3 out of 10 to a 5 or 6 out of 10.

    And Caterpillar is threatening to leave Illinois, too. It couldn’t be due to the Illinois Democrats’ decision to increase personal income taxes by 66 percent and corporate taxes by 46 percent, could it? Such a huge spike in tax rates, pushing Illinois into the top ten taxed states couldn’t cause anyone or any business to leave the state, could it? I mean voting with their feet? Nobody does that, right?

  2. Mr Hitchcock wrote:

    I mean voting with their feet? Nobody does that, right?

    Mack Trucks corporate office left Allentown for North Carolina, but that was, ostensibly, to have their corporate offices adjacent to parent company Volvo’s; the fact that North Carolina is Right to Work and Pennsylvania is very union-friendly surely had nothing to do with that! :)

    The decision to leave isn’t strictly dollars-and-sense: corporations are nothing more than groups of people, led by people, and those people don’t necessarily want to uproot their lives and move away from their homes. Local loyalties, family and friends, a whole host of things play into the decisions, and that means that not every contemplated move will happen, even if it’s economically sensible. But, at the margins, it means that some “voting with their feet” will occur.

  3. http://newyork.cbslocal.com/2011/05/13/poll-1-in-3-young-new-yorkers-say-they-will-move-out-of-state/

    Poll: 1 In 3 Young New Yorkers Plans To Move Out Of State
    What’s Worse, 25% Of Adults Say They’re Out In 5 Years

    It appears people do not like high taxes. Who does? Other than those who pay no taxes directly. (I know if you buy something or have a car, you pay taxes, but you are conditioned not to notice. But back when you could itemize your state sales taxes, I would look at PA and MD, and PA was 20% lower)

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