Nevada's senseless war on California -- latimes.com.
In case you haven't heard, California and Nevada are at war. Not an old-fashioned war with bullets and tanks, but a newfangled media battle over which one is the last best hope for entrepreneurs and businesses in these troubled times.
Nevada started it. The Nevada Development Authority launched a campaign that will spend a million dollars over a year to air a series of ads enticing California businesses to move to Las Vegas. The spots boast about Nevada's low taxes and workers' comp fees and feature a chimpanzee and a really bad actress portraying a television newswoman who turns into a pig wearing bright red lipstick.
So what?
But the real significance of the spat is that it furthers a dangerous and phony economic myth -- that hordes of nomadic businesses are roaming the country, plopping down for a year or two in a tax haven and then packing up and moving on the minute a neighboring state bats an alluring low-tax eye.
The fact is the come-hither look is useless: Relatively few businesses, once they're formed, pick up and move across state lines. Over the last several years, the nonpartisan Public Policy Institute of California has done exhaustive research trying to measure precisely how many jobs California has lost because of such moves, while also measuring the offsetting number we have gained from businesses moving into the state. The conclusion? The impact is tiny. The researchers found that the average annual job loss was only .06% of California's total employment. Just to be clear, that's not 6%; it's six one-hundredths of 1%.
Why?
In other words, most businesses live and die where they are born, thriving or failing on the merit of their product, the wisdom or imprudence of their managers' decisions and the luck of the marketplace.
When that truth is ignored, often because of the kind of one-upmanship foolishness embodied in both the Nevada and California ads, states can participate in a tax-cutting competition that does them more harm than good. Taxes, after all, fund things that businesses need.
Want to improve the business climate? Invest in good schools to produce better-educated workers. Build infrastructure projects on which all businesses depend, like transportation and water systems. Put more cops on the streets and pay for proven social programs so that workers have attractive neighborhoods in which to raise their families. Low taxes are good, but they're not a panacea.
Precisely.
And those who think tax competition is a) effective or b) beneficial had better read and absorb the rest of the article becasue it really puts the nail in their coffin.
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But aren’t they competing for business start- ups? A significant number of businesses are new starts which will be interested in setting up in a low tax location.
Get real
They start near home
Tax is way down on the list of issues
You have to make money first
Don’t you guys realise that?
Have you ever run a company?
Richard
SO why are you so afraid of tax competition, if it doesn’t attract anyone, why try and stop and why blog about it the whole time.
You say companies atart up near home and then most likely don’t move, and then list the billions of dollars the US is losing in tax revenue from tax competition and companies moving offshore?
Creg
Small firms don’t move
Big ones move artificially
Both statements are true
Both confirm that tax competition is abusive, of taxpayers, of markets and of the rule of law
If that’s what you support, why not say so?
Richard
“If that’s what you support, why not say so?”
Because then they will not be able to post on your blog Richard and you will delete their posts. I no longer reside in our green and pleasant land but often wonder how a government that never even got elected had the audacity to introduce the 50 Percent Rate,no wonder the brains are leaving in their droves…
I guess it’s not all bad news though it means there will be plenty of space for people with no right of entry….
Richard, in this instance, I really don’t see how you can claim that tax competition is abusive of taxpayers, markets and the rule of law.
You’re talking about areas where the population has democratically elected representatives who take this approach.