Texas Governor Rick Perry is on a “job-poaching” trip to New York. Let’s say he “attracts” some businesses to move to his low-wage, low-tax state. That means good-paying jobs in one part of our country become low-paying jobs in another and business taxes that supported good schools in one part of our country don’t support good schools in another part. This adds up to a net loss for our country, economy and society.
Texas Governor Perry is running this ad in New York, asking businesses to move to Texas to escape taxes, regulations and the ability of citizens to sue if harmed by a corporation:
“Higher taxes. Stifling regulations. Bureaucrats telling you whether you can even drink a Big Gulp.” And, “Our state is number one for business because we have no state income tax, fair and predictable regulations, and lawsuit reforms that keep trial lawyers out of your pockets so you can grow your business.”
Let’s look at what he’s pitching here:
1) Lower taxes, meaning government doesn’t have the resources to educate people, maintain the infrastructure, etc.
2) Fewer regulations, meaning terrible pollution, few protections for consumers, few on-the-job safety inspections, terrible working conditions, etc. Maybe not even regulate and inspect fertilizer plants. Here is an aerial photo after that West Texas fertilizer plant that blew up a whole town:
3) Lawsuit “reforms,” meaning people can’t go to court when a corporation does something that harms them. Companies free to scam, con, exploit, defraud, etc. with impunity.
4) Texas is also a “right-to-work” state, meaning that state policy works to suppress unions, which lowers wages and benefits and worker rights are limited. Some employers like that — more money to the top and the workers can’t do anything about how you treat them.
New York Racing To Bottom
New York Governor Andrew Cuomo is proposing “tax-free” areas in his own state, to “attract” businesses. Cuomo is proposing to offer no business or income taxes for 10 years to a company and its employees who comes to New York.
So in a few years you’ll be hearing that New York’s schools and colleges are in trouble, and the bridges are in trouble, etc. (Maybe even fertilizer plants blowing up and taking whole towns with them?)
The Larger Economy
If a company moves from a good-paying state to a low-paying state so the owners can pocket the wage difference for themselves, what is the net result to our economy?
Hypothetical company with 500 employees, hypothetical states (not naming any names!):
- Company closes facility in good state, lays off 500 people making $50,000.
- Company opens facility in gutter state, “creates” 500 jobs at $20,000 per year.
- Good state pays unemployment benefits for a while, suffers hundreds of home-foreclosures, nearby small businesses close, businesses supplying and supporting the now-closed facility go out of business, schools close because of loss of tax base, city goes bankrupt, entire area deteriorates.
- Gutter state doesn’t bother with good schools, etc., doesn’t inspect businesses, etc.
- Workers in gutter state paid so little they have to get government assistance, don’t make enough to support local small businesses, etc. Gutter state does not improve.
- Net payroll of employed people in the country’s economy drops by $15,000,000 per year. (Plus lost benefits, effect on local businesses, region…)
- Owners of company pocket that $15 million per year wage differential, put most of it in Cayman Islands tax haven, use the rest to bribe politicians to ignore what all of this is doing to the country, economy and society.
- Deregulated fertilizer plant blows up, town wiped out.
Oh, add to this, everyone across the entire country feels wage pressure, as employers say “shut up or we’ll move your job, too.
The Moral Of The Story
You have to look at the effect on the larger economy of these policies. Low wages don’t help any economy, anywhere. Low taxes don’t “create jobs” they actually kill jobs and the entire economy in a few years because defunded government can’t educate people, maintain infrastructure, etc. All that these “race-to-the-bottom” policies do is make people poorer and enable exploiters to force people into humiliating desperation.
And this doesn’t just apply to states. This is a picture of what happened to our country’s economy when “free trade” deals opened us up to a worldwide race to the bottom.
PS When Gov. Perry ran an ad in Californa to try to poach jobs, Gov. Jerry Brown responded that the ad was “barely a fart.”