I forgot to post this… here is my full column that ran in the Washington County Daily News last week.
Elon Musk made big headlines when he announced that he would move Tesla’s headquarters from California to Texas, but he is actually a bit late to the trend. Over the past decade, over 10,000 companies have fled California for other states with Texas being the number one destination. Joining Tesla in just the last month, tech giants Oracle and Hewlett Packard Enterprise have announced that they are moving their headquarters to Texas. There is no reason why Wisconsin could not also be a destination state for businesses. It is a policy choice, and it will take some hard work.
Musk’s comments about his decision were as flamboyant as ever. Calling California “fascist” and “entitled,” he made his announcement with his customary flourish. But underneath the bombast is a calculated business decision to operate in a state that is a better climate for the business and his employees. It is the same business decision being made by thousands of companies.
The effects of coronavirus are enabling and accelerating the movement. When the pandemic forced employees to work from home, many companies and employees found that it worked well for both. Remote working is particularly sustainable in industries like technology and financial services. With employees able to work from anywhere, one of the challenges to moving a headquarters is removed. It is much easier for a business to launch into another state when they do not need to overcome the gravitational pull generated by employee density.
As companies are liberated from needing to worry as much about where employees live, they are free to look to locate in states that offer a better climate for the business and the top leadership. Texas is a destination because of the policy choices made by state leaders for decades. Texas has no personal income tax, no corporate income tax, a lower cost of living, a businessfriendly regulatory climate, world-class universities, and a vibrant, diverse place to live. There is no reason that Wisconsin could not become the Texas of the 2030s, but we will have to start making changes now.
Governor Scott Walker and the Republican Legislature made Wisconsin significantly more attractive to businesses in the last decade. They did so by reducing the regulatory burden and slightly controlling taxes. They did not make the big systemic changes or spending cuts that will be needed to make Wisconsin a prime destination state. In order to become a business magnet, lawmakers will need to lower the cost of living and doing business by do things like eliminating the personal income tax, reducing or eliminating the corporate income tax, lowering fees and taxes across the board, and reducing the regulatory burden.
For comparison, the state of Texas spends about $4,361 per person. The state of Wisconsin spends about $8,785 per person. Local spending is a little closer, but Wisconsin still spends more. Texas spends $5,663 per person while Wisconsin spends $6,169 per person. All told, Wisconsin state and local governments spend $4,930 more per year per person than Texas. That is $19,720 per year in additional taxing and spending for a family of four. Wisconsin cannot reduce the cost of government and, subsequently, the cost of living if it does not reduce government spending.
One wonders where all of that spending is going. Both states have world-class public universities, but Texas state taxpayers spend less than 50% per capita on them. Both states have a good transportation infrastructure, but Wisconsin state taxpayers spend 13.8% more per capita. Wisconsin is spending almost 28% more on K-12 education for marginally better results, but the student demographics are drastically different.
Generally, as one goes through the state budget, Wisconsin spends much more on almost everything than other states. It is difficult to see any additional value for all of that additional spending. “Value” should be the word that dominates the upcoming state budget debate. If taxpayers are going to spend 10%, 25%, or 50% more on something than other states, then state politicians should be able to articulate how taxpayers are getting 10%, 25%, or 50% more value for the dollars spent. If they can’t, then the spending is just being wasted.
The upcoming budget session is another opportunity for Wisconsin policy-makers to make the choices that will determine if Wisconsin will ever be a destination state for businesses and workers. If they choose to keep increasing spending because it is the path of least resistance, then businesses and people will continue to relocate into other states and Wisconsin will miss this historic opportunity when businesses are going to be moving more than ever.