Friday, May 27, 2005

The Taxachusetts Myth

Last week, there was an article in the Globe that reported on a study showing that Massachusetts has one of the lightest corporate tax burdens in the nation, despite having a reputation for being a bad place to do business. From the article:

A report released last month by the Washington-based Council on State Taxation, which represents 575 multistate corporations, found that Massachusetts businesses paid 36 percent of all local and state taxes in the Bay State, a percentage that was 47th among the states and the District of Columbia and lower than the national average of 43 percent. As a share of all economic activity, the tax burden borne by Bay State firms ranked 42d.

In my opinion, there is no bigger obstacle to bringing businesses to Massachusetts than the old "Taxachusetts" label. Whether based in reality or not, Massachusetts is still fighting the image of a bad place to do business. Again, from the Globe article:
Surveys last year by CFO Magazine and Chief Executive Magazine both pegged Massachusetts as one of the worst five states in which to do business. The first survey was based entirely on taxes, while the second also considered regulations and overall quality of life.
Fifteen years of Republican governors have done nothing to remedy the Commonwealth's image problem. Romney, in particular not only failed to defend Massachusetts against the attacks of his fellow Republicans in the 2004 campaign, but is now joining in the chorus as he prepares for 2008. While they have managed to make some headway in lowering the state taxes, this has been offset by increases in fees and property taxes, but just as seriously an increase in the cost of living and doing business in Massachusetts.

It's the cost of living, and in particular the high cost of housing that I think is causing the state to hemhorrage jobs and population. In fact there was another recent study by which showed Boston as the tenth most expensive US city to live in, and the third highest among those outside of California (where at least the weather's nice). Companies have stopped considering Massachusetts because there's no affordable place to build their facilities or house their employees.

The state Republicans want the 2006 election (and heck, all elections) to be about taxes. They need the Taxachusetts Myth because telling voters that Democrats will raise their taxes or waste their money is the only thing they have to run on in a state where Democrats hold the advantage on almost all other issues. They want people to think that our state's taxes are too high and lowering will bring jobs back to the Commonwealth. The reality, though, is that taxes are way down the list of reasons companies leave. If we want to be serious about fixing the state's economy in any lasting way, we've got to be willing to address the housing crisis.

For a good discussion with Massachusetts CEOs on this and other topics, check out this article from Commonwealth Magazine.

[UPDATE]: This morning's Herald has an article along these lines also. Apparently, consumer and business confidence is down in Massachusetts, even as the governor's various mouthpieces claim the economy is getting better. Tip for the powers that be: a recovery doesn't exist unless people feel like the economy is getting better. What good are a couple thousand new jobs if they don't pay enough to allow the new employees to buy a house, or heck, even buy gas to get there and you're constantly looking over your shoulder to see if the company is going to get bought out or ship your job to china?