Government Spending as a Percentage of the Economy, International Comparisons

[Toro]

Speaking of transcending politics, those companies also have something that helps them: Location.

In places like Minnesota, where that's not as much of an issue, the very illiberal high tax and regulation state is losing businesses to Iowa and South Dakota.

In fact, every few years, they have to legislatively bribe 3M to stay.....I don't think SDMM would have quite the ring.

Sure, I agree. Paul Krugman - remember him? - won a Nobel Prize for his work on the economics of location.

Of course, all things being equal, taxes and lower regulation is a good thing for business. However, it is not the only or even the primary reason for the location of economic activity in the United States.

 

[Oddball]

Well, in that case, you comment about the companies and MA and CA is of but borderline relevance, I guess.

Who can forget tovarich Krugman?....Still too bad that he very seldom, if ever, brings economics into his bi-weekly political screeds at NYT.

 

[Toro]

How can it be irrelevant? CA and MA are often held out as examples of anti-business states with high taxes and more regulation yet that is where much of the capital for innovation of this nation is domiciled. This means that there are other factors in this country that overwhelm intra-state differences for taxes and regulation with regards to innovation and business formation. Taxes and regulations are certainly not irrelevant but the institutions and fundamental character of the nation matter more. Americans are hard-working, industrious, innovative and optimistic people. This matters far more than if the tax rate is 25% or 30%.

 

[Paulie]

What about a lot of banks establishing their headquarters in Delaware to avoid overtaxation?

 

[Toro]

What about a lot of banks establishing their headquarters in Delaware to avoid overtaxation?

Most large companies are incorporated in Delaware for both the taxes and legal reasons.

Of course taxation has some effect. One of the reasons why I came down here, or more accurately, stayed here, was because taxes are lower. I often think about redomiciling myself in a tax haven such as the Caymans or Bermuda to avoid taxes. Capital is fungible and can move at a keystroke. All I need is a computer, a telephone and an Internet connection. But I have chosen to stay here rather than domiciling offshore for a variety of reasons even though I pay higher taxes

Also if taxes were, say 70% in one state and 20% in another, that would be a huge factor in making decisions. But if the differences are 25% or 20%, not so much.