Wednesday, November 26, 2008

Thoughts on the conveyance tax increase-why taxation does not lead to growth

According to the Lucas County Commissioners, if they increase this tax - the 'cost' of selling your property - they will be able to fund their economic development efforts. Their 'logic' is that an additional tax amount will lead to growth in the county.

Increasing a tax does NOT lead to growth - except in the numbers of entities that put their hands out for that money.

The way to provide an environment that leads to growth is NOT to make it more costly to do business in the area. Taking more money from taxpayers, residents, businesses and even visitors, does not leave them with funds to invest, create new products, spend in the local economy or start/expand a business. Taxes remove capital from the economy and divert them to expanded government functions - which create nothing for the market.

Before the Lucas County Improvement Corporation was re-organized, it performed various functions on behalf of its members. The County's Economic Development Department also performed various functions - supporting economic development projects and providing the 'public sector tools' to be used by private investors as they created the jobs. If the LCIC were to revert to its previous structure, these tasks would still be performed.

I'm not advocating the destruction of the LCIC, but I am questioning the logic of removing money from the economy in order to support a government (or quasi-government) agency.

Think about it - when did increased taxes ever create more jobs than the private sector if the money stayed in the hands of the taxpayers? Some will claim that taxation can result in construction jobs as government spends money to construct buildings (like arenas) or roads. While some may question the logic of government building roads, most would agree that roads are a legitimate function of government so it is true that when government builds roads, it 'creates' a job. However, it is a temporary job and certainly not a long-term strategy for economic growth.

True growth in a community comes about when individuals have money - not when government takes every spare cent, and then some. When people have money, they put some into savings accounts, generating assets that banks use for lending. When people have money, they invest it, providing the capital for others to expand and grow. When people have money, they spend it, putting dollars into the local economy and exchanging it for goods and services which, in turn, creates demand for those goods and services, leading to growth.

If government takes those funds, they're telling you and me and every taxpayer, resident and business, that they need those dollars for their own purposes more than they think you need them. Talk about arrogance - telling us that their purposes (in this case: funding positions and offices and expenses) are more important than our own retirement, medical bills, mortgages, children's educations, etc....

To make matters worse, their additional taxation will NOT contribute to economic development or growth in the county.

(You see, the problem isn't what we are or aren't doing - it's that we need MORE MONEY. And where have we heard that argument before???)

Many individuals who would normally be against additional taxation are saying that dedicating this tax to the LCIC is okay. They also say that consolidating the functions being performed by the numerous economic development entities will result in the turn-around we so desperately want to see. But they're putting the cart before the horse. They're all saying to impose the tax and provide the funds. Why aren't they first saying consolidate, eliminate duplication and then see how much money is truly necessary?

The task force the Commissioners established to make recommendations about the LCIC did more than say 'provide steady funding.' Other suggestions included changing the bylaws and structure and exiting their costly offices in the train station. According to some, that would save thousands every month. Why isn't cutting costs the FIRST step in order to determine exactly how much money is actually required to operate? Why is a tax the first step?

It's because a tax is 'easy' to do, while restructuring would require some to give up their power inherent in the current set-up. It would also result in a loss of control for a few who would rather take more of your money than 'do the right thing.' It's also because the people making the decisions do not understand the basics of economics. Remember, these are the same people who think billing your insurance company, Medicaid or Medicare for ambulance runs doesn't result in any cost to you. With that sort of logic, it should come as no surprise that they think taxing you and taking more of your money will result in growth in the area.

The problem in Lucas County is not a lack of spending on economic development. It is the philosophy that government needs our disposable income and, once it has it, they will somehow create jobs. Even when these same politicians mouth the words 'government doesn't create jobs,' they act in a opposite way, giving lie to the words they've uttered.

If the Lucas County Commissioners and those supporting this increased tax were really interested in economic development, why did they vote to put increased property tax levies on the ballot? Why did they support and campaign for the increased property taxes? Why are they spending money on non-essential things, thus increasing the costs of government? Why are they creating news rules and regulations on people and businesses? Why are they raising fees and creating new costs for people and businesses to pay? Why are they NOT doing what has proven to work every time: lowering tax rates????

If these individuals were truly dedicated to creating an environment that leads to growth, they'd do what works - and they'd know what that is.

1 comment:

Carol said...

The idea that taxing the residents/businesses of an area in order to support economic development is backward. Plain and simple.

If I were going to open a business (which I am not – I took my business OUT of Lucas County) in that area I would head down to Wood County. An area that asks some very appropriate questions when approached by a potential business owner. Questions that are short and to the point.

1. What type of business do you want to open?
2. What areas have you found that interests you?
3. How can we help you achieve this?

Simple, isn’t it? There’s not a laundry list of things that one “must do” before they can discuss the project. There’s not an attitude of “you’re lucky we are talking to you” going on.

There IS an attitude of “we’re happy and proud that you’ve chosen Wood County. We’re here to help YOU.” And they mean it.

And people living in Lucas County can certainly secure jobs in Wood County; the distance is not that far. But that doesn’t help the likes of Lucas County.

IMO – the Lucas County Commissioners, Toledo City Council (generally), the RGP, the LCIC and LISC are all too busy standing in their own way to be effective. They are so busy acting like a bunch of dogs p-ing on a tree that they are their own worst enemies, and that trickles down to being enemies of the populace.

Turf wars are so unattractive – and futile. The losers are never the ones that started it. It’s always those that have no control over it.

The cure? A cold water bath – the kind that elicits an immediate scream followed by the willingness to be more cooperative and doing what they are supposed to be doing.

Imagine that. All the entities working together, harmoniously, producing a realistic and palatable plan to help attract business, retain business, encourage businesses to grow AND do it without that power grabbing need to fleece the pockets of the residents.

I know I’m bound to wake up from this dream. But it’s nice to linger in fantasy land for a while.

Google Analytics Alternative