It was the best of ideas; it was the worst of ideas. I speak of the new budget proposals made yesterday in two states: Massachusetts and Wisconsin. Both states are in the grip of the national economic malaise that has persisted during the Obama years, but the approaches taken in these states are quite different. Governor Patrick of Massachusetts yesterday proposed a tax increase of about 7% in state taxes. This large increase, however, is accompanied by a change to the tax structure raising income taxes and lowering sales taxes so that the increased burden on wage earners in the Bay State is close to a 20% increase in tax on those earnings. Meanwhile, those who do not pay taxes on their income (like criminals, illegal aliens and others) will see their tax burdens decline with the lower sales tax. Patrick says he wants to use the extra funds mainly for education. In Wisconsin, governor Scott Walker used his annual state of the state message to the legislature to propose a middle class tax cut, regulatory reform and economic development, particularly through a new law governing mining in the state. These two states provide a good comparison. Both have about the same number of people with Massachusetts closer to 7 million and Wisconsin closer to 6 million. The current budget out of Boston spends almost the same as the one passed in Madison. The difference is that for the moment, the two states are going down different paths.
In Massachusetts, the plan is to take more out of the local economy and spend it. It will be interesting to see how many folks decide to relocate out of the state and move to New Hampshire where there are no taxes. Absent a robust national economy, it is likely that a sufficient number of firms will relocate so that the ongoing decline of the Massachusetts economy will continue. Those who will be hardest hit by this will not be the wealthy; no, it will hit the middle and lower income working people whose jobs will depart the state.
In Wisconsin, the goal is to make it easier for businesses to move into the state. Walker wants to set up a one-stop shop for dealing with the state bureaucracy as part of his plan. For anyone who has ever tried to get the necessary approvals for a business in a highly regulated state like these two, it is well known that different state agencies have different (and sometimes conflicting) requirements and that the approval process takes a long time at great expense. Imagine, for example, having to get approval for construction of a new plant where approvals are needed for the well system from one agency, for the water purification system from another agency, and for the sewage disposal system from a third agency. On top of that put the approvals needed from the land use planning agency and the environmental agency that deals with water issues. Walker wants to put all these competing agencies into one so that a new business venture can get through the permitting process much more quickly and with much less expense while making sure that the goals of the regulations are still met.
It will be interesting to see how the economies of the two states fare in comparison to each other over the next few years. My prediction, unsurprisingly, is that Wisconsin will do much better.
In Massachusetts, the plan is to take more out of the local economy and spend it. It will be interesting to see how many folks decide to relocate out of the state and move to New Hampshire where there are no taxes. Absent a robust national economy, it is likely that a sufficient number of firms will relocate so that the ongoing decline of the Massachusetts economy will continue. Those who will be hardest hit by this will not be the wealthy; no, it will hit the middle and lower income working people whose jobs will depart the state.
In Wisconsin, the goal is to make it easier for businesses to move into the state. Walker wants to set up a one-stop shop for dealing with the state bureaucracy as part of his plan. For anyone who has ever tried to get the necessary approvals for a business in a highly regulated state like these two, it is well known that different state agencies have different (and sometimes conflicting) requirements and that the approval process takes a long time at great expense. Imagine, for example, having to get approval for construction of a new plant where approvals are needed for the well system from one agency, for the water purification system from another agency, and for the sewage disposal system from a third agency. On top of that put the approvals needed from the land use planning agency and the environmental agency that deals with water issues. Walker wants to put all these competing agencies into one so that a new business venture can get through the permitting process much more quickly and with much less expense while making sure that the goals of the regulations are still met.
It will be interesting to see how the economies of the two states fare in comparison to each other over the next few years. My prediction, unsurprisingly, is that Wisconsin will do much better.
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