Nice tax weather we’re having!

Hooray, Oregon is #10 on the list of states with the best “business tax climate” as reported by The Tax Foundation. This is a particularly hokey exercise in my opinion for several reasons:

  1. Many, many things influence where a business locates. Is there an educated workforce? Is this where company employees want to live? Do they have access to customers, transportation? What does the competition look like, and on and on. Taxes is just one cost of doing business.
  2. States competing with one another to offer the best “tax climate” is essentially a tax cut scheme. For state and local government its a race to the bottom. Who will cut taxes and therefore services, borrow more, and defer costs, to bring in business. Only to watch business move on to a “better climate”
  3. The list itself is bogus. Look at the “tax hells” where presumably no business should locate: California (#47), Connecticut (#38), New York (#48). These are some of wealthiest, fastest growing states in the US. Yes, they are expensive locations, including their taxes, but that’s because they are so successful. People and businesses want to locate there.

The Tax Foundation claims to be non-partisan, but they supports little more than cutting taxes, and therefore redistributing wealth to the wealthy–at the expense of the public interest and future generations.

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3 Comments

Filed under economics, radical right

3 responses to “Nice tax weather we’re having!

  1. Jacob

    FYI, your first is addressed in the study on page 4, where they write:

    “Clearly, there are many non-tax factors that affect a state’s overall business climate: its proximity to raw materials or transportation centers, its regulatory or legal structures, the quality of its education system and the skill of its workforce, not to mention the intangible perception of a state’s “quality of life.”7 The 2008 SBTCI does not measure the impact of these important features of a state’s overall business climate. Rather, the SBTCI merely seeks to measure the tax component of each state’s business climate.”

    http://www.taxfoundation.org/files/bp57.pdf

    Also, your claim that the Tax Foundation only supports “cutting taxes” is false. For example, see here where they argue against tax-cutting “tax holidays”:

    http://www.taxfoundation.org/news/show/1742.html

    Or here where they argue for eliminating tax-cutting deductions and credits because they lead to economic distortions:

    http://www.taxfoundation.org/news/show/1149.html

  2. Milton

    What are you talking about? Have you read anything else on the Tax Foundation website? They criticize many tax cuts, especially deductions and credits. Their AMT plan was revenue neutral (meaning no tax cut) and in fact it was highly progressive. They suggested raising the federal income tax instead of cigarette taxes to pay for children’s health insurance out of principle of what they called sound tax policy.

    I would say they just oppose special tax cuts as much as they support lower taxes. Take a look at their blog once in a while.

    And the race to the bottom you’ve talked about has actually been mentioned in their blog.

  3. dwightinsight

    The Tax Foundation has a lot of good data and thoughtful stuff on their website. My point is that their main effect on public opinion, regardless of the disclaimers and caveats that might appear in their reports, is to convince people that low taxes = good economic policy no matter what the tax revenue is used for. This is a political opinion that is refuted frequently by the economists listed on my blogroll. For example, the Tax Foundation’s highest profile report is “tax freedom day” which implies that low taxes are ipso facto good public policy, . This is why conservative/libertarian economists like Dick Armey, Treas. Sec John Snow, and Milton Friedman are listed as supporters—but no liberals.

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