In Heavily Taxed States, People Vote with their Feet

Major news sources like to monitor migration trends among states. The Census Bureau has been watching these trends also and what you find "between the lines," is really quite interesting.

The fastest growing states for population are (in order) Wyoming, Utah, Texas, Colorado, Alaska, Arizona, Washington, North Carolina, Georgia, and South Carolina.
There are several unique characteristics about these population shifts:

• They are often huge. Texas gained over 500,000 in one year. This is largely attributable to the huge number of businesses that have relocated to the state.
• All of these states lean Republican or are very Republican. Republican strategists’ lips salivate when they think of these population shifts to their state. This means more Congressional seats moving to their states and away (as you will see later) from Democrat states. However, they may be surprised by the long term results, as I will explain later.
• They tend to be in the West or (even more so) the South. This has been a trend that has persisted for decades and continues to be the case. Politically, the implications of this are significant. All of our Presidents since John F. Kennedy have been from Texas, California, Georgia, and Arkansas (with the exception of our sitting President and Gerald Ford.
  

What about states that have seen a decline in population? They are, starting with the biggest loser, Michigan, Maine, Rhode Island, Ohio, Vermont, New Hampshire, West Virginia, Pennsylvania, New York, and Mississippi.

• They are in overwhelmingly liberal states. With the exception of Mississippi, these states are all "true blue." This, again, makes conservatives excited and liberals concerned, but the long term implications could prove different.
• With the exception of Mississippi, all of these are in the East Coast and Midwest, which have also suffered when it comes to political prestige and power.
  

What are the lessons learned?

I believe that the political and economic environment of many of these states have become so hostile to entrepreneurship and economic growth, people are voting with their feet in a quest to find better jobs and opportunities. Michigan has taken a pounding for decades (my family was among the "Michiganders" who flew South to flee the rust belt in the 1970s) and continues to face economic pressures due to unions that international competitors never have to encounter. New York and Connecticut are noted for their constant regulatory pressures they apply on business, forcing many to have little choice but to leave. The list goes on; people are leaving these states on the quest for economic prosperity.

I believe Republicans, who appear to be the long term winners in these shifts, should be cautious in their enthusiasm. I remember when I worked as an aide for US Senator Gordon Humphrey of New Hampshire. That state had become extremely Republican by the 1980s and was enjoying growth as people fled the disastrous political and economic situation in Massachusetts just to the South. Eventually New Hampshire became increasingly liberal as people moved who knew there were things wrong with their home state -- taxes, crime, etc. -- but didn't realize that the people they were voting for were the source of their problems. So once they moved to a new promise land, they brought the same terrible policies with them. Today, New Hampshire is now a major population loser as the migrants from Massachusetts wonder what happened to the Granite State. It is a vicious cycle.

The future looks bright for conservative friendly states on paper, but this will only be the case if new voters support the very policies that have made these states so attractive in the first place.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Understanding Human Nature Matters in an Economy

There has been a war that has raged for centuries in the fields of politics, economics, and the social sciences in general. It is a debate between those who say that all public policy should be developed on how people actually behave versus those who argue that public policy should be developed with the end result or intention in mind. Members of the former group are generally called "positive" theorists when it comes to approaching issues because they make decisions based on the way things are. They strive to take an objective view of public policy. The latter group has a "normative" view of economics. These individuals have a subjective view of human behavior. They want a disconnect between the policy and the intended result, because that goal is the only thing that matters. Unfortunately for them, we silly people tend to undermine that goal.

The examples of this are too numerous to cite in a space this small, but I will give a few examples.

Minimum Wage


The minimum wage is an excellent example of normative economics at work and is proof that the "road to hell is paved with good intentions." "Well meaning" politicians want to raise the standard of living for those who are earning a low salary and they raise the minimum wage. Ironically, this policy is always followed with a spike in unemployment, particularly for low income workers, and leads to higher prices (thus devouring the increase in income). In July of both last year and this there were significant increases in unemployment that accompanied a jump in minimum wage. People are paid based on what value the job has to the employer. If minimum wage raises the cost of the job above its value, the job has to go.


Taxing Business

Another popular area to attack is businesses through increasing taxation. This is the ultimate opportunity, we are told to "soak the rich" and to pound those greedy corporations. Unfortunately, businesses don't pay taxes. Period. Taxes are a fixed cost of doing business, like employees, office supplies, office space, and any of the other over head necessary to stay in business. Just like these other items, higher taxes are simply a fixed cost. Businesses don't pay taxes they collect them. They collect them, that is, until they get too high and they lose their competitive advantage, which is how corporations and the jobs they created are exported. If the cost of business is too high, businesses move to where it is more affordable because when humans (or businesses run by humans) are attacked, they either fight or flight. If we want the US to be the greatest job creator in the world, we would have a truly honest government that doesn't tax business at all. A consumption tax, which every person feels in every transaction, is far more honest that waging a war on wealth creation, be it on businesses and individuals.

Why Bureaucracy is Bureaucratic

I keep hearing stories of how much could be saved if government cut this program or that expenditure and am amazed by people who are shocked that the reductions in spending never happen. The reason is simple, while business operates on a "profit motive," government operates on a "spending motive." While saving money and making the most of every dollar makes sense in business, it does not in government when power is measured by how much is spent, how many employees one has, and the size of budgets. Short of getting bonuses for cutting agency budgets, bureaucracies will only grow. That is human nature.

These are just a few of the areas where government defies the laws of human nature. If you see a public policy that does not "make sense," you are likely right. Government rarely recognizes human nature in decision making, which is among the reasons government is out of control.

Kevin Price is Host of the Price of Business, the longest running show on AM 650 (M-F at 11 am) in Houston, Texas and on AOL Radio. His articles often appear in Chicago Sun Times, Reuters, USA Today, and other national media. Steve Moore of the Wall Street Journal calls Price the “best business talk show host in the country.” Find out why and visit his blog at www.BizPlusBlog.com and his show site at www.PriceofBusiness.com. You can also find Price on Strategy Room at FoxNews.com.

When Taxes hurt, Government is more Accountable

Recently I received a pitch on a guest who argued that we could have "life and government without taxes." It was a slow news day and the thesis was interesting, so I thought, "why not?" After the show I could name several reasons. In essence this guest took my audience through a maze that was evasive when it came to the question of where revenue would come from. He indicated that it came from sources that "would typically to to the employees of the company" or "consumers in lower prices." So, there were taxes, just the type of taxes that people or business would not "feel." These are the worst kind of taxes.

The government has been striving to develop ways of taxing people, without us realizing it. Two examples of this are inflation and taxes on business.

The first, inflation, is obvious. Inflation is not just "high prices," as we have been taught in high school economics, but "too much money chasing too few goods." Inflation does not mean "expanding prices," but means "growing money supply." Why does the government do it? Ostensibly to encourage economic activity in a stagnant economy. Some times that happens since it is politically popular and most people do not understand the larger consequences. The real reason is far more sinister. It took over 180 years for the federal government to reach a national debt of $1 trillion. Obama is raising it that amount annually for the next ten years. These have to be paid for and the United States has taken a chapter out of Zimbabwe's playbook by pumping $1.2 trillion into the money supply in an attempt to pay off its bills. Many Americans have (rightly) been alarmed by the more than $1.5 trillion we have seen in bailouts. According to the Washington Post, these inflationary efforts have the potential of being much more far reaching, noting that "combined with the billions already deployed by the Fed, the new money dwarfs even the biggest government bailouts of financial companies." Inflation is a hidden tax that takes value from every dollar out there without a vote of a Member of Congress.

The other is business taxes. Populists love these type of taxes, done in the spirt of the late Sen. Russell Long, "Don't tax you, don't tax me, tax the fellow behind the tree." That "fellow" is the business, which is such an easy target for government because it does not vote (lobby, yes, but does not vote). The thing that government does not admit is that businesses do not pay taxes, but are merely tax collectors. Businesses do not pay taxes any more than they pay rent, for employees, transportation, or any other cost of doing business. Businesses do not pay taxes, but collect them. When those taxes become too high, businesses move to places that have lower taxes. The US now has the second highest tax rate of any industrialized country in the world and over twenty countries have simple flat tax rates that are considerably less than ours. This has led to the exporting of both jobs and businesses.

The best taxes hurt those that vote and should be seen frequently. That is why I would eliminate all taxes on wealth creation (including business tax) and replace it with a consumption tax that would hurt every time someone makes a purchase. Furthermore, it would allow us to collect money from illegals and criminals that slip under the radar screen. For every painful purchase we would have one more reminder of the need to vote and to put those who are fiscally responsible in power.

Kevin Price is Host of the Price of Business, the longest running show on AM 650 (M-F at 11 am) in Houston, Texas and on AOL Radio. His articles often appear in Chicago Sun Times, Reuters, USA Today, and other national media. Steve Moore of the Wall Street Journal calls Price the “best business talk show host in the country.” Find out why and visit his blog at www.BizPlusBlog.com and his show site at www.PriceofBusiness.com. You can also find Price on Strategy Room at FoxNews.com.