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Ellen Belcher is the Dayton Daily News opinion pages editor. She writes about state government, education, the environment, higher education and all things Dayton.
Martin Gottlieb is an editorial writer and columnist for the Dayton Daily News opinion pages. He focuses on the political process itself and does such national issues as war, the economy, taxes and Social Security, as well as a hodge-podge of local and state issues.Home > Blogs > A Matter of Opinion > Archives > 2011 > May > 04 > Entry
Editorial: Competition between states getting us nowhere
George Will had a column on these pages Sunday, May 1, headlined “Businesses go where they’re treated well.” He noted that Illinois is losing population to nearby states, and he linked this phenomenon to high taxes, saying the Wall Street Journal calls Illinois “one of the most expensive places in the world to conduct business.”
Mr. Will specifically noted that Illinois-based Caterpillar, Inc. has opened a site in Indiana (as it is doing in Clayton) and quoted Indiana Gov. Mitch Daniels: “It’s like living next door to the ‘The Simpsons,’ you know, the dysfunctional family down the block.”
There is, however, another side to the story
about states competing with each other for businesses. Three developments last week cast some light on how that competition plays out in Ohio:
• This newspaper reported on the same day as the Will column that the state of Ohio has given out tax credits to the tune of $104,000 for each job it claims to have helped create or save in the Dayton area during the past three years.
Statewide, expenditures have come to $5.4 billion. (For purposes of comparison, the projected state budget deficit that’s causing all the cuts in the pending budget is about $8 billion over two years.)
And that’s just the state’s money. The number doesn’t count what cities, counties or other local governments spend.
And it includes jobs that already exist, but are not moved from the state after a company has raised that possibility. In the Dayton area, more than half the jobs said to be saved or created were saved.
• The former governor of Michigan, Jennifer Granholm, was in Ohio last week discussing economic development. Columbus Dispatch writer Joe Hallett wrote:
“Sure, she said, admitting that she and former Ohio Gov. Ted Strickland, a fellow Democrat, continually tried to lure companies away from each other by dangling incentives…. ‘(W)e’re all throwing tax credits at them.’
“Granholm said corporations know they can extract the sun, the stars and the moon from states just by mentioning they might go elsewhere…. ‘The question is: Are we being played?’”
• A study came out last week saying that Ohio has the third-lowest tax burden in the country on new business investments.
In the 2010 campaign, candidate John Kasich ran on the premise that Ohio’s problem in economic development is high taxes and excessive regulation. This seemed odd, because the state’s business tax structure was largely shaped by an all-Republican state government in 2005.
Now the Council on State Taxation says that structure — built around creation of a small “commercial activity tax” and elimination of other taxes — looks good to business.
The council was born as an offshoot of the Chamber of Commerce. So the Kasich administration couldn’t easily — and didn’t — gainsay its findings.
Worth noting is this: Local taxes often make Ohio taxes as a whole look worse than if you just look at state taxes. But the council study is about the combination of state and local taxes.
How much do taxes affect business decisions? There are a lot of views on that. Former Gov. Granholm’s: “In listening to the business community, I cut taxes 99 times, and I ended up shrinking government more than any state in the nation…. And, yet, we still have the highest unemployment rate. There was no correlation.”
Take that testimony with a grain of political salt and you still end up with the absurd situation of the two states hardest hit by the collapse of the auto industry — Michigan and Ohio — competing with, of all entities, each other.
And doing that by reducing the state revenue necessary to confront the economic problems caused by the collapse of the economy.
And shifting the burden for supplying the revenue to individuals.
There has to be a better way.
Gov. Kasich has created a new mechanism, JobsOhio, in which a public/private entity will act as a provider of venture capital. But he’s also been playing aggressively and proudly under the pre-existing system of handing out incentives. And even his new baby is all about beating other states.
That competition appears inevitable. It is doing more harm than good. If the governor can make it do more good than harm, that’ll be a neat trick.
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