The Governor That Stole Christmas

It’s hard to tell which performance was more cringe-worthy—last week’s Saturday Night Live impersonation of New York Gov. David Paterson, or his real-life budget presentation on Tuesday.

Paterson laid out a plan to create and raise 137 different taxes and fees on the people of New York. Gov. Paterson’s holiday scroogery includes 4% taxes on: cable and satellite television services; clothing and shoes under $500—with a two-week tax holiday; music, videos, and pictures you download to your iPod; and tickets to movies, concerts, and sporting events. Non-diet sodas will come with a new 18% tax.

But drivers, in particular, will find themselves caught in Paterson’s tax trap:

* 5% tax on luxury vehicles;
* 4% tax on tax, limo, and bus rides;
* 25% increase in the motor vehicle registration and driver’s license fees;
* $10 increase (from $15 to $25) in the price of new “reflectorized” license plates; and
* Elimination of the 8-cent-per-gallon cap on the state’s gasoline tax.

For decades, states like New York and California acceded to the demands of the labor unions and professional agitators to create and expand government programs, paying for them through high income, capital gains, and dividend taxes on “the rich.” But now that Wall Street is shedding jobs by the tens of thousands, those pools of revenue have run dry. While Paterson was willing to cut next year’s growth rate to a little more than 1%, without the political will to take on the bureaucratic interests and roll back the runaway spending, he ends up diming and quartering his citizens to death.

At least, those who choose to stay. “You name it, he taxes it,” said state Sen. Martin Golden of the Paterson plan. “If anybody's contemplating leaving the state of New York, this should push them over the top.”

New York businesses seeking an alternative to Paterson’s panhandling might want to consider Texas. Because our elected leaders made the hard choices and exercised fiscal restraint during our 2003 budget shortfall, “Texas has created and maintained a business-friendly environment that continues to attract companies and support innovation and competitiveness,” as our governor, Rick Perry, reiterated earlier this week.

Let’s hope that the 81st Texas Legislature approaches its decisions with the mindset that New York and California need to be more like Texas, and not the other way around. The continuing headlines out of Albany and Sacramento should make that a no-brainer.

What do you think?

To leave your opinion click on the word "COMMENT(S)" below

TPPF COMMENTARY: The importance of business friendliness

Earlier this week, Comptroller Susan Combs issued preliminary estimates on the first batch of receipts from Texas' new margins tax. While the elected officials wring their hands over whether the tax brings in as much revenue as expected, TPPF Senior Fellow William Murchison writes in this week's commentary that they ought to also concern themselves with how the tax affects its long-standing positive relationship with businesses.

----------

The importance of business friendliness

By William Murchison

We understand desirability well enough in human terms. Don’t we?

Want a friend, be a friend, is the rule. Figure out the relationship in terms of mutual satisfactions. OK?

Why is it so hard, in that case, to apply the rule of thumb to governments and the ways they order, or disorder, their relationships with businesses whose job-creating, tax-paying potential they can’t live without? A state (or a city or a county or a country) that wants to be loved, economically speaking, must make itself lovable, by implementation of business policies that business loves.

Which brings us, with some satisfaction but just a bit of trepidation, to the question of how we’re doing in Texas along those lines.

So far, so good, is the immediate answer. But there’s the future to think about.

Texas likes business. Its fiscal and regulatory policies generally inspire business to like Texas in return. Forbes magazine calls modern Texas the fourth-best state for business. Not bad – except a year earlier, it was second best; falling this year behind No. 1 Virginia, No. 2 Utah, and No. 3 North Carolina. Hmmm.

Let’s see what the Washington, D. C.-based Tax Foundation has to say, based on its analysis of our state’s tax policies. Yes, again, we’re doing reasonably well: No. 8 in the country for “tax climate.”

The top three – Wyoming, South Dakota, and Nevada – aren’t strictly comparable to a semi-industrialized state with 24.1 million people and 254 counties, so let’s not start getting jealous. Let us note instead that Texans pay only 9.3 percent of their income to state and local government, compared with a national average of 11 percent. No small reason for our standing, as practically all Texans know, is the absence of a state income tax. Only six other states enjoy that blessing.

So what’s the problem here? Is there a problem?

A new feature of life called the Margins Tax – a 1 percent gross receipts tax – has begun to haunt those who ponder the state’s economic future. Enactment of the Margins Tax, in 2006, as replacement for Robin Hood property tax reductions, caused Texas’ drop to eighth place in tax climate from a consistent sixth dating back to 2003.

Where’s this thing going? That’s the question we have to ask with intensity and persistence. The last thing Texas should want at this stage is the inadvertent shaping of tax policies that undermine its relationship with business – that make our state not a more, but rather a less, desirable place to set up shop and hire people and send goods to market.

As the Tax Foundation observes, “The modern market is characterized by mobile capital and labor. Therefore, companies will locate where they have the greatest competitive advantage. States with the best tax system will be the most competitive in attracting new businesses and most effective at generating economic and employment growth.”

Whining and sniveling – the “don’t they love us anymore?” stuff – won’t help a bit. A relationship of mutual satisfactions entails projection of those satisfactions in both directions. When, for one reason or another, those satisfactions wane, new considerations take over. Suddenly the friends, the pals, the running mates, see each other as strangers.

A “business friendly” environment depends directly on acts of friendship: like saying, through specific tax policies, hey, we want you here. It’s harder than it sounds. A state growing as fast and as unpredictably as Texas finds itself challenged to expand essential services at prudent cost. What has to drive budgeting in Texas, at all governmental levels, is scrupulous consideration not of what we might want if we had all the money in the world, but rather of what we need most, and how we might most prudently pay for it.

We’ll never quit wrangling over taxes. No society does. We’ll know we’re getting somewhere when our political leaders signal with one heart and one accord their understanding of tax policy as a two-way street: as even and well-paved for those who pay the taxes as for those who consume the services.

William Murchison is a Senior Fellow at the Texas Public Policy Foundation, a non-profit, free-market research institute based in Austin.

What do you think?

To leave your opinion click on the word "COMMENT(S)" below