The Role of Taxes

There are a number of arguments made in favor of lowering taxes:

• Some people's income is so low that without reduced taxes, they cannot make ends meet.
• Some people need the money to invest in the private sector so that we all get the benefit of capitalism which includes more jobs.
• Lower taxes are a way to attract and/or retain business.

Left at that, there is not much to argue about. But let's add a couple of other thoughts. After all, we do have other goals besides lower taxes.

• There is a need for public services and infrastructure including public schools.  Without them, business will not be healthy. To fund transportation systems, public schools, and preserve public heath and safety, we need to raise taxes.
• Maybe some people's cry for lower taxes is really a way of disguising their Grover Norquist objective:  "My goal is to cut government in half in twenty-five years," he says, "to get it down to the size where we can drown it in the bathtub."
• Then, there is the more subtle point that study after study demonstrates that lower taxes are not a critical element in determining business development decisions. There are so many sources that prove that point:
  • So, are taxes the most important site selection factor for companies when choosing a future facility location? Of course not. In fact, in the overall scheme of things, taxes probably rank somewhere between No. 3 and 10, depending upon whom you ask.
  • Critics of the tax incentives, however, say that local governments are competing in an unnecessary race to the bottom by offering increasingly deep local tax cuts. They contend that tax breaks are far from the most important factor when companies choose where to locate their facilities.

  These last two points come from views that are sympathetic to business. And one more observation from the business community:

  The most intelligent thing the U.S. government can do is to beef up the education system," Craig Barrett, Intel's chief executive officer, said in an interview last month. "The K-12 system does a good job of weeding out any students interested in math and science. We prepare them to be lawyers and consultants instead."

  The specific studies I have seen rank taxes about 6th or 7th in importance. If you want to figure out what is important, put yourself in the shoes of the chief executive who will live in the community and ask "What would they want for their family?" Damn, make it easy and ask "What would I want?"

  • Good public schools
  • A safe neighborhood
  • Access to a well-educated, solid workforce
  • A clean environment with access to public parks and recreation
  • Cultural opportunities
  • Interesting neighborhoods

  Taxes do become critical when there are competing areas nearby with the same attributes and local taxes.  That is something that can often be managed through state government, or through cooperative agreements between the municipalities if they realize that 'dumbing down' is not the answer.

  If you want an unscientific, unblemished view of this from the perspective of someone who is not a flaming liberal, check out: Playground Politics -Earth to conservatives: college graduates don't care about state income tax rates.

Comments

[Bill Swan]

I posted a comment on the link for the Playground Politics article that I'll summarize here. I agree completely. In my case, I was a musician and left because the club scene in Madison was hurting in the early nineties, probably still is, due to the fact that my favorite bands played at clubs that were over 21, so many national acts would pass over madison, especially acts with fanbases begining in the 16-20 range. Understandably, the drinking age was a federally driven response, but there could be ways around the rigorous enforcement in the clubs, giving out wristbands to "of age" folks like they do in clubs down in Chicago.

But now that I am 35 and plan to have kids soon, my wife and I are considering a move back to Madison from the Bay Area, because we can't afford to buy a house there in a market that has a median home price of $650,000+. The secondary schools are crap in CA to boot, ranking 49th or so, depending on the study. And many of the parents spoil their children there. It's one thing to be a nurturant parent, and another thing to be a permissive one. I don't want my kids to get their start around that, since I didn't.

Point is...none of the above have anything to do with the tax rates. The fact that I left when I was 23 and am now considering a move back at, oh, 36 or 37 or so, has nothing to do with the tax rates. All are "quality of life" things that are not easy to quantify. I didn't leave just because of the clubs, nor did I move to CA because of the weather. But the former didn't help and the latter didn't hurt. And the taxes were nowhere on the radar. So long as the Government isn't corrupt...and in WI it's less so than many other states, I see taxes as paying dues for infrastructure and to support things like the arts and other, hard-to-quantify-to-satisfy-the-bean-counters "quality of life" considerations.

[Bill Hughes]

As a School Superintendent in a Milwaukee suburban community I am regularly asked to make presentations to the Chamber of Commerce and to businesses that are looking at relocating to our community. In fact, just this week I am rearranging my schedule to make a presentation this Friday morning. The decision makers of these organizations are very interested in the quality of the schools, the level of support the community has for the public schools, the fine arts, the level of graduate success and the type of leadership in the community. The following points which are all correlated are absoutely critical to attracting businesses and their leaders to a community.
Good public schools
A safe neighborhood
Access to a well-educated, solid workforce
A clean environment with access to public parks and recreation
Cultural opportunities
Interesting neighborhoods

Check out Greendale Wisconsin.

Bill Hughes