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Oh, Those Whacky Massachusetts People...

Wow, ask and ye shall receive.

On Saturday, I spelled out my economic theories -- and how the government's main role in managing the economy almost always ends in disaster. And then, on Sunday, the Boston Globe publishes an editorial that pretty much proves my points.

Taxes are a necessary evil. No one likes paying them. It's essential human nature to minimize how much you pay in taxes. And corporations are, when you get down to the bare facts, simply groups of people, and will act much like people.

When it comes to taxes, there are significant differences between corporations and people. For one, corporations have the option of simply passing along the cost of taxes to their customers. For another, they have far greater resources to find ways of minimizing their tax burden. For a third, thanks to a couple of court rulings, they have a legal duty to minimize their expenditures and maximize their profits.

So it should come as no great surprise that corporations in Massachusetts are doing pretty much all they can to reduce their tax burden.

So, what does Massachusetts do? They engage in an endless series of what the Globe rightfully calls "whack-a-mole" with loopholes and exclusions and credits and asset-shuffling and paper changes and numbers-juggling to try to get the corporations to simply give the state the money it demands from them.

The fun part is, if the state gets too efficient in its never-sated appetite for tax money, the corporations have one final big gun they can play: the can simply pick up their marbles and go elsewhere. Doing business in Massachusetts has a lot of advantages -- a dense population (in several ways), a seriously high-tech-savvy environment, lots of good colleges, and so on.

But those advantages are not unique to the Bay State. And they are not priceless. If the state keeps raising the price of doing business there, then more and more companies will take a cold, hard look at their spreadsheets and come to the conclusion that it just might be cost-effective to simply walk away.

Oddly enough, the most profound words on the subject come from one of New Hampshire's proudest sons, who found his greatest fame and success in Massachusetts. Daniel Webster, when arguing the landmark Supreme Court case McCulloch v. Maryland, stated "the power to tax is the power to destroy."

It is a potential power, one that need not be invoked, but all too often attempts to use it as a tool ends destructively. And the ultimate victim of that is often the little guys.

In 2010, Massachusetts is expected to lose at least one Congressional seat after the census, perhaps two. The Globe's circulation numbers keep plummeting, much like those of its parent, the New York Times.

People are voting with their feet, and with their wallets. But no one seems to want to listen.


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Comments (8)

"...corporations have the o... (Below threshold)

"...corporations have the option of simply passing along the cost of taxes to their customers."

And they do as long as the customers will pay the price. And when the customer will no longer pay the price business either has to absorb the loss or go out of business..or move.

It is just that simple but the greedy public just
can't seem to grasp the concept.

Yes, but it's really OK. On... (Below threshold)

Yes, but it's really OK. Only the bitter, clinging people are leaving. The college professors, politicians and activist judges have decided to stay. You know...the quality, superior government employees.

...how the government's ... (Below threshold)
Jeff Blogworthy:

...how the government's main role in managing the economy almost always ends in disaster.

Who ever said that "managing the economy" is the government's main role? You state that like it is an axiom Jay. This is why we're in trouble. Maybe you didn't mean that the way it sounds.

Jeff, look at it this way: ... (Below threshold)

Jeff, look at it this way: their creation of disasters has become their main role.

If there isn't a disaster, ... (Below threshold)

If there isn't a disaster, one must be created so the government can manage it!

Businesses charge as much a... (Below threshold)

Businesses charge as much as they can for their products according to demand. Taxes don't have anything to do with the setting of prices. Tax is just another cost.

Sure, if taxes are high to the point that it would make it impossible to profit then there won't be a viable business to tax, and if you confiscate via tax the money a corporation would have otherwise used to expand operations you destroy jobs, but it's simplistic and wrong to say that corporations pass along tax costs to their customers.

I'm not saying this to imply that taxing of corporations is OK, it clearly has detrimental effects on the economy and IMHO is morally equivalent to theft. However, the argument that you can't tax a corporation because they pass the cost on to the consumer is patently false and is a pet peeve of mine.

I don't know. If the price... (Below threshold)

I don't know. If the price of real estate is any market index of a location's popularity, Massachusetts is doing pretty well. Income is also high there. Biotech is still expanding.

I think the real crunch will be because of rising heating prices, and that will be worse in NH because it's colder there. That will have a much bigger impact than tax policies.

Also, according to <a href=... (Below threshold)

Also, according to the Tax Foundation, Massachusetts ranks 28 out of 50 in total state and local tax burden, not extreme. New Hampshire ranks 49, one above Alaska, but most states can't make most of their money on tolls, liquor or oil.






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