Wisconsin is chasing jobs with tax benefits, and throwing tax benefits at factories will turn out as badly as throwing tax benefits at big-box stores and sports teams. But the reason states engage in such behavior is that doing so might be a dominant strategy, and you look good when your strategy works.Arms race, dominant strategy, prisoners' dilemma. The way out is to find a way to cooperate. "Lawmakers in at least a half-dozen states are considering forming a compact in which they would agree to end efforts to lure companies with tax incentives."
Look, though, at who participates. "A similar version to New York's bill is also making its way through the Arizona and Illinois legislatures, while lawmakers in other states, including Connecticut, Florida, Massachusetts and New Jersey, are considering introducing such legislation." Does the expression "tax hell" come to mind? Particularly, tax hell, with one way of softening the blow to taxpayers gone?
The provision limiting state and local tax deductions at $10,000 wiped away a preferential treatment for high earners in those states, and helps explain why about 20 percent of filers will either get no benefit or see an actual hike in their federal tax bills. The resulting rush for the exits is putting pressure on government budgets in New York, New Jersey and elsewhere while creating a real-estate boom in Florida and other low-tax states.The editorial board at New York's Times haven't caught on yet.
Throw in the fact that some Democrat-controlled states, especially Illinois and New Jersey, already face huge problems with their civil-service pension funds and it’s obvious that the blue-state model is undergoing a major stress test.
Blame also needs to be assigned, of course, to a system in which powerful corporations can milk billions in tax benefits out of cities and states to locate facilities, without any added investment in infrastructure, schools and other benefits. Amazon, one of the richest companies in the world, run by the richest man in the world, had held a nationwide contest in which governments scraped together enough entitlements to satisfy it, even as those same cities struggled to fortify corroding infrastructure and stave off a housing crisis that has pushed the middle class to the brink and forced the poor into homeless shelters.Catch that Divine Passive? "Blame needs to be assigned." As if Klaatu and Gort decreed that New York would be a tax hell.
Mssrs. Cuomo and de Blasio should have better prepared for what was in store, since their constituents are maybe more worried about housing, subways and the cost of living than in job creation alone. In fact, it’s partly thanks to the failure of these elected leaders to seriously address the subway and housing crises that Amazon was met by some with such visceral anger and anxiety. If they’d better anticipated that reaction, they might have worked with the company to address these issues, and win local buy-in before things went off the rails. Then, together with Amazon, they could have helped the city diversify its economy and leverage the power of a tech giant to help solve big problems. It’s an opportunity lost. May it also be a lesson learned.Don't lay that "subway crisis" off on Amazon. The Pennsylvania Railroad built the North River and East River tubes and Pennsylvania Station and Sunnyside Yard in about five years. Fifteen years ago, there's a Cold Spring Shops post on the Second Avenue Subway that has not yet replaced the long-gone Third Avenue Elevated.
By all means, yes, let's get rid of corporate welfare, it's a bigger money-suck than the national endowments. Let's also stop pretending that a federal deduction for state and local taxes is somehow a good thing because it lessens the pain of living in a tax hell.
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