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Montana Viewpoint
ANOTHER ONE GETS AWAY

May 16, 2001

Well, Montana suffered another economic development blow the other day. Boeing decided to move it’s corporate headquarters from Seattle to Chicago. Of course, the consolation might be that Montana was never in the running. Was it taxes? Well, in our case, probably not, but you sure hear a lot about taxes being a disincentive to economic development. That doesn’t seem to have figured much in Boeing’s decision to leave Seattle, though.

That was the thrust of an article in an out-of-the-way publication called “State Tax Notes,” in which the author pointed out that Boeing’s decision seemed to fly in the face of the argument that states with the lowest tax burdens get the first look by companies wanting to relocate. The author, a contributing editor of the publication, pointed out that Washington had no income tax, and that its taxes on corporations were minimal. (In an interesting note, the author assumed that since Washington has no corporate income tax, businesses pretty much escaped taxation. He neglected to discover that Washington just has an alias for corporate taxation called the Business and Opportunity Tax.)

Even so, when you compare commercial property taxes between states, Illinois ranks highest for taxes on a business worth $25 million, and Washington ranks 48th according to a Minnesota Taxpayers’ Association study. Average taxes in Illinois would be $2,077,043 versus $324,722 for Washington.

But, still and all, Boeing is not moving its aircraft operations, just its corporate headquarters which employ about 1000 souls; one would assume highly-paid souls. Does the same tax argument apply? Businesses won’t relocate to places where their executives are heavily taxed? How can they be less taxed than in Washington, one of a few states without personal income taxes.

The answer is, they can’t, at least not on the income tax side. Looking at still another study, this one by the District of Columbia Tax Commission on individual taxes (income, property, sales, etc.) paid in various cities, Seattle ranks 45th from the top. That’s if you´re pulling down $150,000 a year and have a spouse and two kids. Chicago? They’re number 37, but it’s about a $3000 difference, which is maybe peanuts when you’re making bucks like that. (By comparison, Billings is 22nd from the top in that income category.)

Did Chicago offer incentives to get Boeing to move there? You bet, something like a $20 million tax package plus training programs, according to the Seattle Times, and a gentleman at the Illinois Department of Commerce. That´s the same treatment any business gets offered if they relocate to Illinois. Was it a deciding factor? Didn’t hurt, I’m sure, but there are a lot of other aspects Boeing took into account besides tax incentives.

We offer tax incentives to new and expanding businesses in Montana, too, but businesses don’t often seem to take advantage of them. Maybe they would if they were more widely publicized. Two new electrical generating companies, Continental Energy and NorthWestern Corporation recently planned construction of large generation facilities in Montana. This was before the 2001 Legislature gave a tax break to new generation facilities. Will they take it? They’re not dumb, of course they will, now that we’ve offered some of your money to them. Well, it would have been your money if the state had ever collected it. It could have helped pay for your Medicaid or helped send your kids to college.

The point is, these businesses made their decisions without being offered tax breaks. Businesses make decisions based on many more issues than a state’s tax policy, and every dollar that a state gives away in unneeded tax incentives is a dollar than will not serve the public. We need to husband our revenues, not hand them out like legislators with a glow on.

 

Jim Elliott
Phone: 406-444-1556
Mail: State Senate Helena, MT 59620

jim@jimelliott.org