DAYS AFTER Massachusetts residents began feeling the sting of new tax increases, Florida's Republican governor, Rick Scott, cheerfully reminded them that they have other options.
On Aug. 6, Scott sent letters to 100 Massachusetts business owners, inviting them to relocate to the Sunshine State "because we have the perfect climate for your business." He trumpeted his state's "incredible economic turnaround," and drew a few pointed contrasts: "While Florida's unemployment rate has seen the second-largest drop in the country, Massachusetts' June unemployment rate increased to the highest since November 2011," Scott wrote. "While Florida ranks fifth in the nation for our business tax climate, Massachusetts is stuck at No. 22, according to the Tax Foundation." And now that taxes are up again — Beacon Hill raised taxes on gasoline and cigarettes, and enacted a 6.25 percent sales tax on software and computer services that has the tech sector in an uproar — "it's bound to get worse in Massachusetts."
Florida Governor Rick Scott is trying to woo Bay State businesses.
From Scott's Democratic counterpart in Boston came a huffy response. "I am not surprised that other states wish they had the successful and growing innovation businesses that we have here in Massachusetts," said Governor Deval Patrick's economic development chief, Greg Bialecki. Low taxes may be venerated in red states like Florida, but the governor of bluest Massachusetts worships at a different altar. "We have committed to long-term investments in education, innovation, and infrastructure, all good news for companies doing business here," Bialecki said.
But if "long-term investments" — i.e., permanent tax and spending hikes— are such good news for Massachusetts entrepreneurs, it's hard to understand why the Massachusetts High Technology Council and the Massachusetts Taxpayers Foundation, two of the commonwealth's leading business advocates, have launched a campaign to repeal the new software tax. Or why it isn't only analysts at the nonpartisan Tax Foundation who judge the business tax environment in Florida to be far more appealing than the one that prevails in Massachusetts. In May, the tech-focused business magazine Fast Company ranked Florida the best state in the nation for business innovation and startup culture. Massachusetts came in at No. 42.
If tax-more-spend-more really were the formula for spurring growth and encouraging entrepreneurs, why isn't Patrick the one sending out invitations? Unlike Scott, who points out that Florida has no income tax, Patrick could try enticing business owners with the advantages of moving to a state where the combined state and local tax burden (as a percentage of income) is the nation's 8th heaviest. He could make the same pitch to business leaders in Florida and other low-tax states that he has repeatedly made at home: The way to "significantly improve our economic tomorrows," is with big tax and spending increases today.
He could cite Forbes magazine, which gives Massachusetts top marks for quality of life — reflected in strong schools, a healthy population, arts and recreation opportunities, and stellar universities — while simultaneously observing that business costs and regulations in this state are among the most onerous in America. A worthwhile tradeoff? Forbes seems to think so: It ranks Massachusetts higher than all but 16 other states, including Florida.
If a two-day break from sales taxes can affect people's economic behavior, imagine the impact of a state's year-round tax climate.
The argument can be made, but will it convince taxpayers, entrepreneurs, and business innovators to move to Massachusetts? Jim Stergios of the Pioneer Institute, a market-oriented think tank in Boston, notes that between 1990 and 2007, the number of companies headquartered in Massachusetts fell from 16,000 to 11,000 —accounting for the loss of about 250,000 jobs. Over the past two decades, he says, Massachusetts has experienced no net employment growth. Massachusetts today "is still 100,000 jobs short of even our 2001 employment levels."
And all the while, taxpayers keep moving away from states like Massachusetts, where taxes are high, and migrating to states like Florida, where the tax burden is low.
Is it all about taxes? Clearly not; decisions about where to live and work are affected by all kinds of considerations, from weather to family to education. But it is preposterous to imagine that nobody changes their economic behavior in order to minimize their tax bill. If individual shoppers will defer a purchase until the annual sales-tax holiday, entrepreneurs and investors deciding where to establish a company are certainly apt to take taxes into account.
Massachusetts may be a perfect fit for your business. But if it's not, Florida's governor would like to remind you: You've got other options.
(Jeff Jacoby is a columnist for The Boston Globe).
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