As if living under the thumb of Scott Walker wasn't bad enough, Governor of New York Andrew Cuomo has been running ads like the one above, trying to convince Wisconsin businesses to move to New York State. One of the incentives that is touted in the advertisement is no property taxes for ten years.
Property taxes in New York State are considered a local tax, raised and spent locally to finance local governments and public schools, this tax is the the largest single revenue source for the support of municipal and school district services. Property taxes fund schools, police and fire protection, road maintenance, and other local government services.
The state of New York is enticing out of state businesses to move there with the incentive of no property tax for ten years. Let's say Bubba, the CEO and owner of Bubba's Widgets, sees this commercial and decides to move his company to New York state. During that ten years Bubba's widget manufacturing benefits not only from paying no property taxes, but Bubba's also benefits from a highly educated workforce and great infrastructure that allows his trucks to roll in and out of his factory—where he employs the same number of employees that he used to employ in his former state. No new jobs were created, they were just shifted from one place to another so Bubba could pocket more of his profits.
During this time the community Bubba's moved to is struggling to pay for basic services. Police officers and firefighters are laid off. Schools see class sizes increase, and textbooks are not purchased. Maintenance of municipal infrastructure, roads, bridges, water treatment and distribution is deferred, that great infrastructure Bubba started with is now crumbling. The community that Bubba left is also reeling from the loss of jobs and tax revenue and is also deferring maintenance and increasing class sizes.
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Bubba, with his extra profits, was able to purchase a new yacht and enrolled his children in exclusive private schools. At the end of ten years Bubba moves his company to another community where he was offered new tax incentives, leaving a trail of destruction wherever his company has been.
Bubba's fictional tale is an all-too-common story in the United States today. Across the country municipalities and states have been using tax incentives to get businesses to move to their state. Wisconsin's Lt. Governor Rebecca Kleefisch personally called businesses in Illinois to try to convince them move to Wisconsin after Illinois passed a tax increase and Wisconsin cut taxes.
Poaching businesses from one place to another does not create jobs. That is an illusion for the "winner" of the poaching game. That win is also likely temporary and is something Illinois started experiencing in 2011:
llinois may have little choice but to offer bigger breaks to many of those companies or risk seeing them leave, even though the state already faces a budget deficit that could top $9 billion annually in coming years.
If a state or municipality wants to bring jobs in their area, the way to do it is not to poach jobs from another state. Instead of creating jobs with tax cuts and poaching them from other cities our communities should be working to create strong infrastructure and an educated populace that would make them attractive to businesses. That is where we should be investing our money.
Tax incentives are little more than gambling and the odds are likely worse than at the roulette table in Vegas. You might win when you bet on seventeen black, but, sooner or later you are going to let it ride, and the wheel will stop on twenty-three red and you lose it all.
The losers in this game are our schools, infrastructure, and basic governmental services. Want to know why you are paying more in user fees? It is because businesses are squeezing our government for more and more tax incentives. Every community in this nation must realize that no one wins in this game except for the Bubbas of the world. The workers don't win, the communities may see it as a win, but a few years later the companies will hold a community hostage for more incentives, and will threaten to leave. Who does that help? We are all in this together and need to look at the bigger picture. Moving jobs around does not create jobs. It just moves them from one place to another. This madness of cutting taxes to attract businesses needs to end.