Saturday, April 09, 2005

Nagin Pitches to Governor... reports:

Tax breaks to lure video game developers, biotechnology companies, robotics businesses, rubber manufacturers and music publishers are on top of New Orleans Mayor Ray Nagin's legislative agenda this year. He was in Baton Rouge Friday pitching his package of ideas to Gov. Kathleen Blanco.

Nagin also wants the state to waive for five years the sales taxes on new manufacturing businesses that open in Louisiana and the tax on manufacturing machinery and equipment that already is being phased out.

The governor didn't commit to backing any of the bills in the legislative session that begins April 25, but Nagin said she was receptive particularly to ideas that would bring more jobs to Louisiana.

Blanco already has said she doesn't want any tax measures to cost the state any income, so if a lawmaker proposes lowering taxes in one area, she expects a proposal to generate that lost money somewhere else. And Nagin said the governor indicated she didn't want any tax incentives packages to "burden the state any further."

Nagin said most of his tax break proposals are designed to lure new businesses and industries to Louisiana so they wouldn't cause the state to lose any current money it receives. Nagin said he told the governor he would modify or pull any proposals that she felt would be bad for Louisiana.

Robert Lynch, in his 2004 book Rethinking Growth Strategies, offers a contrarian view:

It is commonly thought that firms will migrate to a particular state for the purpose of reducing costs, since lower costs may result in higher profits for business owners. But state and local taxes are not typically a significant cost of doing business. All state and local taxes combined make up but a small share of business costs and reduce profits only to a limited extent.

Indeed, the costs of taxes pale in comparison to many other location-specific costs, and numerous location factors, including qualified workers, proximity to customers, and quality public services, can be more critical than taxes. The availability of these vital location factors depends in large part on each state and locality's commitment to public investment and their ability to pay for it. Research, in fact, substantiates that public investment plays a positive role in helping lower costs for firms.


jbv's Competitive Edge 


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