I’m tired of hearing that lower taxes will bring new business. Politicians chant low taxes like a mantra that answers everything. Governor Cuomo offers to starve many New York communities of money for services by barring them from taxing new business.

Many places in the world have no taxes, and no business opportunities either. Many places in the US charge lower taxes than New York but do much worse. What’s missing in the low tax nonsense includes markets, transportation, supplies, employees, skills, resources and amenities, the things that make places interesting and fun to live in, the reasons company founders live here, why the bosses live here, and why their employees want to live here.

Thinking only about the cost of taxes is like thinking only of the sticker price on a car or a college. The balance sheet has another column. Companies don’t buy TV ads because they’re cheap; they buy them for the number of eyeballs they can reach for their dollars. Companies don’t locate in New York City or Boston because they’re cheap, but because of the advantages they get for their dollars. It’s a big mistake to equate eliminating tax dollars with a business-friendly climate. You have to account for what a location provides, as well as its costs. For some businesses, those big cities are unaffordable; for others they’re perfect, even essential.

What created the upstate manufacturing powerhouses in the nineteenth and twentieth centuries were transportation, education, labor and climate! The ports of Boston and New York, the Erie canal, and the railroads provided superior transportation. An excellent public school system provided a well-prepared work force. Lots of willing immigrants provided labor. And you could work in the summers up here. When other parts of the country solved those problems we lost those comparative advantages. It was never about low taxes.

I attended a talk by the late Kermit Hall, then president of the University at Albany, at a local law firm. Hall showed his audience that companies in creative industries locate in civil liberties friendly states, gay friendly states, because their workforces appreciate the freedom and want to settle there. The ability to provide for a gay or lesbian partner is crucial for some workers. States that support workers’ efforts to provide for each other are attractive.

We all know schools matter – we buy houses in good school districts. Yet we cut what we spend on schools, increase class size, and fire teachers and professors trying to be cheaper, but driving many people away, and the companies that want to hire them.

Low taxes make sense if you don’t need to offer any services to attract a workforce. But that’s not the kind of workforce that gathers around the university campuses that Cuomo is talking about. Their workers want all the amenities – excellent schools, entertainment, parks, places to take care of aging parents, good public health systems, all the things that money, taxes, and only taxes, can buy. They don’t just want it for themselves. They also want those things for the communities they live in – it makes places nicer places to live.

For companies, if all their other requirements are met, state and local taxes are the price of good citizenship.

— This commentary was broadcast on WAMC Northeast Report, July 2, 2013.

2 Responses to Taxes

  1. Terrific post however I was wondering if you
    could write a litte more on this topic? I’d be very thankful if you could elaborate a little bit further.

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