Wednesday, June 10, 2015

Friends Don't Let Friends Raise Taxes


Indiana ran a full page ad in the Wall Street Journal inviting Aetna, GE and Travelers to move to Indiana to avoid Connecticut's proposed tax increase. (Funny, Bush said "No new taxes," and lost his next election. Malloy promised no new taxes, lied, and was re-elected on the promise of no new taxes, and lied again!)

The stories I've seen are putting the ad in the context of a pissing contest between Governor's Malloy and Pence. First Malloy criticized Pence over Indiana's Religious Freedom Restoration Act, now Pence is hitting back. 

I think those stories are missing the point. 

Businesses like to threaten governments they will move if they don't get tax breaks, and often those threats are idle. Moving is expensive. It disrupts the lives of the employees. It can cause management of the business to falter. But they will move. Exxon (the old Standard Oil of New Jersey) moved to Texas, as did Pepsi and many others. And it's not just the old companies that move. Surprisingly, I read recently there are more tech start-ups in Austin Texas than there are in Silicon Valley. "Study: Silicon Valley Is No Longer America’s Startup Capital." 

Texas likes to contrast its lack of an income tax versus rising rates in California and elsehwere. Fortunately I don't worry about taxes increasing again in CT since I was promised twice they wouldn't be raised. After all, Fool me once, shame on you. Fool me twice shame on me. Oops, maybe I will worry about it.

But people and businesses don't move just because of taxes. It costs a lot less to live in some places. Part of that is a function of government policies. California has decided to make building structures difficult so rents are too damn high. Houston has had more housing starts in the past few years than ALL of California. Houston does not burden builders with the same restrictions California does and the result is greater growth in Houston. 

You could argue Houston is destroying its environment with its choices. I would disagree, and obviously there are many in this world who also disagree or believe the potential trade-off is worth it. The population of Texas grew 20% from 2000 to 2010. The US grew 10%, as did California. For the first time since it was a state, California's congressional delegation did not grow in the 2010 re-allocation. That should be a worrying sign to California (and the national Democrats). 

California is still growing, but the growth is slowing and as costs continue to rise for workers, consumers and businesses, I would guess growth continues to slow. Moves across country don't happen overnight, but over decades. Governor Malloy can worry about RFRA and criticize Indiana but if he continues to ignore the impact of his policies on the consumers, workers and businesses of Connecticut, he will preside over a continued weak economy and declining population. 

I have no interest in moving to Texas. I lived in Austin and wasn't impressed. But there are plenty of places I would move to and none of them are on the Eastern seaboard. 



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