State vs. Region – why statewide rankings can hurt cities

Chief arguments led by Republicans against Tom Barrett or Jim Doyle usually end up one way or another with links to media articles or headlines showing Wisconsin as a bad state to do business. On my post yesterday, it happened yet again with a commenter posting an article by Forbes Magazine showing Wisconsin in a crummy state. These aren’t the first and certainly won’t be the last polls showing which states supposedly are the best and which are the worst.

If you look at the Forbes article, you’ll see that Wisconsin is #48 out of 50 states. Yuck! The magazine based the rank among several areas where businesses look for in order to build or expand their operations: Business costs, labor, regulatory environment, economic climate, growth prospects, and quality of life. Wisconsin seemed to do pretty poor towards businesses in the economic climate and growth prospect categories – both of which are essential issues being pointed out by none other than Milwaukee Mayor Tom Barrett in his gubernatorial campaign! While Milwaukee busts its buns trying to promote itself and landing new businesses, the rest of the state struggles along. Case in point: today’s JS article pointing out that over $135 million was provided in incentives to create or retain 7400 jobs in SE Wisconsin/Milwaukee metro area.

Unfortunately, Milwaukee’s positives aren’t making a dent relative to the areas Forbes is looking at. Hence, the rankings dip to unappealing areas.

What I found interesting was the quality of life section – you know, the one where Wisconsin ranks #11 in the Forbes rankings. Businesses want a good quality of life not only for their workers, but also their CEOs and executives. That is why Milwaukee has been one of the better areas in the United States when it comes to weathering out the storm that is the current economic recession.

Look at last Friday’s Business Journal, where they discussed Harley-Davidson’s issues and how other cities and states are trying to land their operations. Note that Mayor Barrett is quoted in the article as “standing at the ready” when Harley officials want to open a dialogue with Milwaukee-area leaders to keep jobs here instead of moving them elsewhere.

Articles like the one in Forbes are where Milwaukee and its leaders like Mayor Barrett get slapped in the face for no reason – Barrett is not the governor or the state legislature and cannot make statewide decisions, yet those who oppose him will make voters believe he can. What is failed to be mentioned by Barrett’s opposition are his campaign talking points on the need to make Wisconsin’s business climate and growth prospects healthier and stronger, and how he will do that as Wisconsin’s next governor.

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15 thoughts on “State vs. Region – why statewide rankings can hurt cities

  1. While Milwaukee busts its buns trying to promote itself and landing new businesses, the rest of the state struggles along.

    Oh, I see it’s the rest of the state that’s a mess & the city of Milwaukee is a paradise. Sorry we’re pulling the state’s standard of living down. Sorry we’re the ones pulling down the states measures of academic achievement, drop out rates, teen pregnancy, etc. And it’s most certainly the rest of the state that’s really doing the polluting – I mean up here in the wasteland, we dump hundreds of millions of gallons of untreated sewage into the lakes up. Oh, wait, nevermind, that would be Milwaukee.

    1. Like it or not, States are judged by its biggest city. Where it goes, the rest of the state shall follow.

      I agree with you on your second posts, incentives are a sanctioned form of government discrimination. But the solution is not that difficult to figure out. Like the saying goes “when chased by a bear you don’t have to be faster than the bear, you just have to be faster than the other guy.” Point being, Wisconsin can be competitive by being more business friendly than neighboring states.

      For example, let’s cut business taxes and then start advertising to business in the Northern Suburbs of Chicago.

      1. Sales tax in Milwaukee: 5.6%

        Sales tax in Chicago: 10%

        That’s not a particularly encouraging business climate.

        1. That’s a start. I have friends that live in Chicago who will travel across State lines to make big item purchases from Best Buy to avoid Chicago Sales tax.

          But consider if Wisconsin adopted a 2% sales tax zone along its borders. Perhaps it would create a number retail jobs, encourage business develop, and provide Wisconsin with sales tax revenue that would ordinarily go to other states.

          1. Ah, now you are starting to sound like Scott Walker, who up until a year ago had no idea how sales taxes work. He suggested a sales tax moratorium to sucker in all of those buyers from neighboring states.

            If someone makes a purchase and carries the item out with them, they pay the local sales tax. If they buy a washing machine for instance from Best Buy and have it delivered they should be charged the sales tax in effect at the delivery address.

            Things like motor vehicles get taxed where they are licensed and registered.

            And of course there is the pesky use tax. If someone from Illinois purchases a large item in Wisconsin and takes it home with them and only pays the Wisconsin rate, they are supposed to pay the difference to Illinois as a use tax. Of course this goes uncollected because there is no way to track it.

            btw: use tax laws apply to all of those ‘tax free’ purchases you make on line…they aren’t actually tax free…it’s just that federal court rulings permit out of state sellers to avoid collecting sales taxes for sales into states where they don’t have a physical presence.

            1. well it was an idea. What’s was yours?

              “If someone makes a purchase and carries the item out with them, they pay the local sales tax. If they buy a washing machine for instance from Best Buy and have it delivered they should be charged the sales tax in effect at the delivery address.”

              Potentially, but there would be a number of variables that would need to be known from your example. I.e. who hired the delivery, was it FOB, was it a floor model or shipped from another location. We could go on and evaluate respective UCC and IRS provisions but we would risk losing the forest through the trees.

              So back to the forest. I believe that a low sales tax zone on our borders would encourage commerce, increase Wisconsin tax revenue, and business development. Your criticism dosen’t address that.

              Empirical evidence supports my position, of course, it also exposes the criticism in that a state like Illinois could create its own border zone to preserve its revenue. I note that Arkansas had similar initiatives regarding its Cigarette tax.

              http://taxfoundation.org/publications/show/24599.html

              “Things like motor vehicles get taxed where they are licensed and registered.”

              “You are correct, In fact I bought my vehicle in Illinois and registered it here for that very reason. But I fail to see how that is a vaild crticism of my proposal.”

              And of course there is the pesky use tax. If someone from Illinois purchases a large item in Wisconsin and takes it home with them and only pays the Wisconsin rate, they are supposed to pay the difference to Illinois as a use tax. Of course this goes uncollected because there is no way to track it.

              Right. But individuals are also be entitled to a refund of the sales tax paid in another state, but, again no one asks for it. I’d call it a wash.

              Moreover, do we as residents of Wisconsin really care if our Illinois neighbors are not reporting tax obligations in their home state if we are the beneficiary?

              Like I said, It’s an idea. And, I’m open to hearing some of yours.

              1. You are correct, if Best Buy did the delivery they need to charge the correct tax. If you hired a friend or cartage company Best Buy would have no idea where the delivery would be made.

                You are entitled to a refund of sales tax paid in another state if the item is used there. But you are then responsible to pay your local use tax if you bring the item(s) home.

                Let’s face it, motor vehicles are a significant purchase and probably the largest sales taxable item that most of use ever purchase. There would be a big incentive to find a tax haven when purchasing a car if it were possible.

                Here’s why your suggestion won’t work. If I were a Milwaukee merchant I would be totally pissed if my customers started to go to the Illinois border to save 3.6% sales tax. If I were County Executive Walker I would be TOTALLY pissed if my constituents went to the Illinois border to avoid filling the county’s tax coffers.

                It would be politically and economically untenable.

                And the next thing you know Illinois has a dragnet trying to catch tax avoiders at the border….groan.

                1. I think what Ed is missing here is that he seems to think all revenue comes from Sales Tax, and while it is some..It’s not all of it. For instance, we should consider that every Auto sold in Milwaukee or even the entire State of Wisc. would be to go to a Zero Sales tax! Furthermore allow registration of any vehicle as a Wisconsin vehicle. As Wisconsin dealers sell more cars than any other state in the US, Good wages will be paid to sales people. Lots of “Auto tourists” coming to our state to buy their cars. I think this would be an inspiration for Auto manufacturers to return to Wisconsin, or give Harley a reason to stay! We can collect registration fee’s and offer renewal’s to anywhere in the country. It’s out of the box..but It would generate real movement of BIG money in our state.

                  Furthermore, I can tell you that Illin-easion’s do come to Wisconsin to shop and avoid their own 10-12% Sales Tax. Making our State THE low tax Island in the Mid-west..would bring businesses, shoppers and investment to our State. Electing Tom Barrett who has brought ZERO net jobs to Milwaukee, will not do the job. Scott Walker has a good race ahead of him but he’s the favorite..and frankly Tom Barrett isn’t acting like he even wants the job.

                  1. No I don’t think all tax revenue comes from sales taxes. What I am trying to point out is manipulating sales tax rates to spur spending by out to staters isn’t going to fly on a number of levels.

                    Your suggestion to make Wisconsin a car registration haven would bring major lawsuits from other states. They aren’t going to allow their residents to register and pay taxes for cars outside their home states.

                    Believe me, from what I’ve seen the past few weeks, Mayor Barrett is ready for the Gov job.

                    1. Your suggestion to make Wisconsin a car registration haven would bring major lawsuits from other states. They aren’t going to allow their residents to register and pay taxes for cars outside their home states.

                      Not quite sure what you think they could do about it. And this is already happening. For example, military personnel who move frequently routinely use Texas as their official state of residence for just the reasons mentioned.

                    2. “No I don’t think all tax revenue comes from sales taxes. What I am trying to point out is manipulating sales tax rates to spur spending by out to staters isn’t going to fly on a number of levels.”

                      Ed,

                      Empirical evidence already exists showing that it does work. Consider the link I posted regargarding Arkansas’ tobacco tax. The neighoboring states with lower tobacco taxes are gaining millions in yearly revenues at Arkansas’ expense.

  2. You can provide all the incentives you want, fact is that such things are picking winners & losers and – it’s sanctioned government discrimination. Bribery to get companies to ignore the underlying issues – rather than actually address them. “Taxes are higher and a pain, but here’s some cash.” “Sure insurance is more expensive and you can get sued off the face of the planet for product liability without it even being proven that it was your product, so here’s some tax incentives.”

  3. Super ID. I am not saying lowering tax rates wouldn’t entice people to become tax avoiders…I am saying lower tax zones within Wisconsin wouldn’t work because you’d be hurting other Wisconsin businesses. And don’t think your neighboring states aren’t going to start a crack down on their residents if their revenue loss becomes noticable.

  4. There are special rules set up for military personnel. My son who is stationed in KY has a car registered in KY, one in TN and two in WI. And you stated they use TX as their state of residence…not the same as a Chicagoan trying to register a car he purchases in WI.

    You think IL isn’t going to notice all of the WI tags on cars garaged in IL? How long would Madison allow you to keep an IL tag on your car if you lived here but ‘registered’ it in Iowa?

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