Friday, January 29, 2010

More on taxes

So, taxes on businesses can't be increased because it hurts employment? And the experience of California, where businesses are fleeing the state in droves due to high taxes, shows what happens if you increase taxes on businesses? Uhm, it actually turns out to be a myth that businesses are fleeing California in droves, whether because of "high state taxes" or otherwise. Furthermore, as a percentage of state GDP, California business taxes are actually BELOW AVERAGE, ranking 39th amongst all states in business taxes as a percentage of GDP.

I recall a survey, which is probably findable by a Google search (please try it yourself and let me know what you find), that polled businesses that either left California or expanded somewhere other than California in the past ten years. This poll found that real estate prices and an expensive workforce, not taxes, were overwhelmingly the reason they left or expanded elsewhere. It makes sense when you consider that state and local taxes account for only around 1% of the cost of doing business in California.

In short: Right wingers, please quit repeating long-discredited talking points with no basis in fact. Thank you!

- Badtux the Snarky Penguin
Who really doesn't expect right-wingers to take his advice, since they are soooo addicted to their talking points!


  1. I been reading the series of posts cactus did at Angry Bear in '07. I linked to one in another string. In the comments, the right wingers keep changing the story to have something to object to. It's really quite fascinating.


  2. It'll probably take moron taxes to cure what ails this country. For sure, cutting taxes on the wealthy isn't gonna do it.

  3. Do taxes on a business have any effect what-so-ever on real estate prices and/or the cost of the workforce?

  4. Not really. As I pointed out, taxes on business account for under 2% of business costs. I checked some preliminary numbers here in California and found that income tax costs accounted for around 0.7% of business costs here (that was using numbers from the right-wing Tax Foundation but using per-capita GDP rather than absolute numbers in order to properly scale them to account for the fact that California businesses are amazingly productive compared to business anywhere else on the planet).

    Land costs are generally expensive near major California employment centers because of simple supply and demand -- the supply is limited by geography (typically surrounding mountain ranges that are unbuildable and where few transportation corridors are available to get to the other side of the mountain range), and there is great demand but not much buildable land left. So prices get bid up, even in the absence of a bubble. Nothing to do with taxes.

    As for high labor costs, those are driven by the high land costs, not by taxes. My rent for a good quality one bedroom apartment in San Jose is $1800 per month. I could rent the same basic apartment for $800 per month in San Antonio. So you see why I'd require $1,000 per month more in wages before I'd accept a job here in California. The reality is that if you do not pay that extra money, people simply won't go to work for you -- they'll either go to work for someone who *will* pay the extra wage, or they'll move back home to San Antonio and take the lower wage there, where they can actually afford to live on that wage.

    In short, taxes are a negligible contributor to California real estate prices or cost of workforce. The major factor is supply and demand where land is concerned. (At which point you tell me, "but 60% of Contra Costa County has been rendered unbuildable by land use ordinances!" at which point I'll tell you that I live here and every available piece of usable land has already been built out -- the only land left is either the mountains, which are unbuildable, or the seashore, where there's not enough transportation corridors through the mountains to build more houses there).

    - Badtux the Land Penguin


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