States begging business to take money

Published 10:01 am Friday, March 11, 2011

In the new Republican governors’ furious attempts to balance state budgets, they have universally selected two paths to balance.

First, they have proposed cutting taxes. No, not for you, for business.

Second, they have proposed reducing benefits and pay for state teachers, firefighters, police, security and prison guards, and anyone who may vote Democrat or contribute to Democratic campaigns.

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As the news in Wisconsin has revealed, this ends up not being about pay and benefits as it is about politics and power.

But Wisconsin, like Ohio, does present an interesting set of values that should be questioned for their actual impact.

The new governor in Wisconsin, Scott Walker, took office and immediately cut business taxes by $117 million. Within days after this became law the governor then announced that there was a tax shortfall this year of $137 million, an amount nearly equal to the business tax cuts.

Governor Walker then insisted that the state union employees would have to pay for his tax cuts to business though reduced wages and benefits and retirement support.

He may as well have told the state workers that they should personally send a business a monthly check, perhaps accompanied by a pie or cake and a short note thanking the business for being in the community.

It is the least state workers could do under Walker’s proposals.

But was the business tax cut worth the budget deficit it created? Much less was it worth charging the bill to state employees (though not state legislators or the governor who are apparently paid just right).

As it turns out the Tax Foundation is a conservative institution that identifies the best business environment state-by-state and ranking them accordingly. So we can identify those states that do not have the best, most favorable climate for business and determine if their actions in lowering taxes make sense.

But first, you should know that the Tax Foundation does not include factors in business location including, availability of raw materials, shipping costs and rail and water access, the quality of education and the skill of workers, the intangible quality of life in any given state.

The measurement is strictly based upon the tax component of the business environment in the state.

So this is a singular measure, connected directly to the states, like Wisconsin and Ohio that seek to cut business taxes to be more inviting to new business.

The number one state for business climate is Wyoming. Uh huh, Wyoming. Have you noticed any flood of business moving into Wyoming? No, of course not.

Among the worst business climates, based solely upon tax policy, is New York, tagged at number 49. Yet in terms of jobs New York has an unemployment rate as of December 2010 of 8.2 percent, lower than the national average.

Also among the worst business tax environments is Iowa, a sad number 44. But Iowa’s unemployment rate is 6.1 percent.

Wisconsin was the 38th poorest business climate, but its unemployment, before the latest tax cut, was 7.5 percent.

So why are these states with terrible business tax environments experiencing more jobs than other states? Hard to understand given the Republican governors’ insistence on lower taxes for business.

So we looked at Indiana, number 14 in climate, but with an unemployment rate of 9.5 percent.

Or Michigan, ranked number 20 with an 11.1 percent unemployment.

Or Illinois, number 23, with a 9.2 percent unemployment rate.

The undeniable conclusion? Lowering business tax rates does not lure business to a state or keep business in a state. It simply lowers the tax revenue.

Those “other” factors mean far more to business location.

The governors are wasting our money on their supporters.

Jim Crawford is a retired educator and political enthusiast living here in the Tri-State.