Daily Archives: July 18, 2012

Boom-Towning the US – Economic One-Upsmanship by Texasizing

Good morning readers.  Thanks for coming by for a read this morning.

When the neighbor from up the hill described a business boom going on around Edinburg, Texas, [his previous home] the other evening it got me wondering why.  According to him, the entire Texas coastline is a beehive of manufacturing concerns, either operating, or under construction.  Even a Chinese owned gigantic steel plant.

After considering why this might be for a couple of days I concluded there’s a middling chance the Texas tax structure’s probably a major piece of it.  Texas doesn’t have a State Income Tax.  It relies almost entirely on sales taxes and property taxes for revenues.

That mightn’t sound too important at first notice.  But consider the implications more closely. 

  • First, workers employed in Texas can enjoy a higher take-home pay than those employed in states where income taxes are the revenue source.  This allows employers to pay the employees less than they’d have to do elsewhere.  Workers pay more when they spend their checks on consumer goods, but it doesn’t come out on profit and loss statements of the companies paying them.
  • Secondly,  CEOs, plant managers, high-ranking professionals living within the State, but who enjoy salaries high enough for investments of their incomes pay taxes only on their property holdings and consumer purchases.  Same as the legion of minimum-wage workers they employ.
  • Thirdly, all the nearby suppliers of raw materials, parts and labor for the industries enjoy the same tax-free status and are almost certainly able to offer their products and services more cheaply than they could do located in areas where State Income Tax exists.

For states with stagnant economies, especially those with coastal port facilities, but not limited to those, seems to me the answer might be to take a page from the Texas book.  The most immediate and obvious answer would be eliminating state income taxes and making it up in sales and property taxes.  But that would take a while.  Meanwhile, Texas booms and everyone else continues to lose jobs.

Naturally each situation would require site-specific solutions for immediate competition with Texas for new industries.  But several options come to mind:

  • Locate your port facilities here and we’ll do whatever’s needed to make absolutely certain your construction costs are lower than they’d be in Texas.  Whatever corners Texan regulators would allow you to cut in construction, environmental and safety standards, our regulators will allow more.
  • We’ll reduce our spending on our State vehicle fleets by putting a moratorium on buying any new vehicles for five years.  That money will be delivered in suitcases full of un-marked $100 bills to the people charged with the decision for your location.
  • We’ll make special interim provisions in our income-tax laws exempting dividends to stockholders, CEO and other high ranking professional employees from our State Income Tax.
  • We’ll lower our minimum wage to lower-level employees to the Texas minimum wage, minus the amount of the State Income Tax.  That will allow you to hire minimum wage-earning workers at the same rate it would cost you if you’d located in Texas.
  • We’ll overlook any hiring of illegal aliens you might do involving jobs good Americans don’t want.  Outdoors, heavy-lifting, that sort of thing.
  • We’ll provide lists of the names and families of all your high-ranking employees to all law enforcement agencies and prosecutors and provide a GET OUT OF JAIL FREE card for each family member.  If you, or family members are busted for illegal drug possession we’ll make certain the arresting officers are suspended or otherwise punished.  Your executive employees will enjoy the same privileges in that regard as any State, local, or Federal politician.
  • If your executives are non-white, non-Anglo, non-protestant they’ll never overhear themselves referred to at the country club as Chinks, slopeheads, zipperheads, Mescins, mackeral-snappers, ragheads, camel jockeys, or sand niggers, as they certainly would in Texas.

Naturally they’d have to develop other business-friendly encouragements over time, but those would, at least open the door for a beginning.

Old Jules

 

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