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>>NYC 8th Wonder of Tax World at 12.62%: A paradigm shift in economics and education

...What brought all this to mind was a piece I read about a young man with a good job who moved from California to Colorado, saying that whatever is left of the California dream is for Hollywood actors — not for "us." Taxes are confiscatory in California with no solution in sight (10.55 percent.) California has been losing its high-tech edge to other states, as well as bleeding good manufacturing jobs.

I then read about a mega-wealthy businessman fleeing from New York to Florida to avoid paying $13,000 a day in state income taxes! (New York hiked the state tax rate on the wealthy from 6.85 percent to 8.97 percent.) New York City is now one of the seven wonders of the tax universe at 12.62 percent.

Hernando Today > News
By JOHN REINIERS
More than Words
Published: February 14, 2010

A paradigm shift is not evolutionary, but a cataclysmic conceptual event that ultimately results in permanent change to society.

The invention of the wheel, the printing press and the Internet come to mind — to name several over the centuries. Somebody had these crazy ideas and wow! But it takes a while before the paradigm settles in. (Just consider the Internet.)

To begin, let me suggest that a transformation in thinking by average people about tax and education policies has been under way for awhile; a paradigm shift punctuated by bursts of energetic political debate.

Many of us are having "crazy" ideas lately about the U.S. economic model that has been based upon massive spending for decades — and having second thoughts about it. Let me explain: Although I still have my doubts about all the polling that says Americans are politically "right" of center, I might agree that the majority are finally getting it "right."

Even those "left" of center.

Those are the misguided boomers who favor big government entitlements and programs, but have finally realized you can't get blood out of a turnip. ("I never got a job from a poor man.") Government can only tax so much. The filthy rich can only support a modest percentage of our population — not everyone.

Younger liberal educated people without life's experiences still don't get it. The paradigm shift is even some left of center now believe the government must return to fiscal sanity or there will be nothing left for them. (The Obama progressive socialist wing of the Democratic Party is still holding fast.) Even those left of center on government payrolls are now concerned for their jobs. Cities and states are going bankrupt.

Given the current man-made economic catastrophe, it would be fair to say the No. 1 motivator for people and business is to make money again. It is counterproductive then for state, local and federal governments to siphon off even more income by taxation from either ordinary or wealthy citizens to pay for bigger and better programs, or to put even more government employees on the payroll. (The only sector still hiring.)

What brought all this to mind was a piece I read about a young man with a good job who moved from California to Colorado, saying that whatever is left of the California dream is for Hollywood actors — not for "us." Taxes are confiscatory in California with no solution in sight (10.55 percent.) California has been losing its high-tech edge to other states, as well as bleeding good manufacturing jobs.

I then read about a mega-wealthy businessman fleeing from New York to Florida to avoid paying $13,000 a day in state income taxes! (New York hiked the state tax rate on the wealthy from 6.85 percent to 8.97 percent.) New York City is now one of the seven wonders of the tax universe at 12.62 percent.

It would seem obvious to any thinking person that the high costs of doing business in a city or a state — fueled by the all-powerful public union employees and unsustainable social programs that require hefty taxes — is causing job erosion. Reversing these costs by reducing taxes would promote job growth.

The Tax Foundation's "2010 State Business Tax Climate Index" rates Florida as number five with the most favorable business tax climate after South Dakota, Wyoming, Alaska and Nevada. I may be prejudiced, but surely Florida would be a more practical state for a business to relocate than the other four. And the Index continues "There are 12 states that do without one or more of the ... major taxes: the corporate tax, the individual income tax or the sales tax." Florida has a leg up on most states with no income tax, but there are some states without corporate or sales taxes. We should keep this in mind.

To that end, Gov. Charlie Crist released a statement on Feb. 1 focusing on small business creation, by proposing a corporate income tax cut "from 5.5 to 4.5 percent, on the first $1 million of ... income." A positive move. As it now stands, Florida already ranks a respectable 15th nationally in corporate income tax. By way of comparison, California, at 8.84 percent is the highest in the West.

Importantly, too, and to add to Florida's competitiveness, in 24 states the combined state and federal corporate tax rates are the highest in the world! Higher than top ranked Japan. A plus for Florida. (The feds are relentless with corporate income taxes. The U.S. is second highest in the world.)

Since the majority of businesses are small businesses, sole proprietorships, partnerships or S-corporations, the individual income tax code is of vital consideration since they report business income as individuals, not as corporations.

Furthermore, individual tax rates are critical for business as it affects the availability of the labor pool. After all, individual income taxes affect businesses indirectly by influencing location decisions by individuals. Two other pluses for Florida.

Moving on to the second paradigm shift, while "quality of life issues" don't put food on the table, Florida University System Chancellor Frank Brogan put high-tech education issues front and center at a January jobs summit in Orlando, saying "We need to push for ... change ... a transition from an economy based on tourism, agriculture ... to a knowledge-based economy" which "will give rise to opportunities in biotech, simulation technologies, in space, aerospace, all the health related research ... alternative energy ..." These are the type of educational goals that have become new millennium economic drivers and attract business. We need to increase degree production in high demand fields — the kind of skills business is looking for — not degrees in the social sciences or the arts. (This need has even been evident at the high school level.)

This was the economic driver for North Carolina. Their university systems have institutionalized economic development by linking university-based technology to business. They have also promoted strong undergraduate engineering programs and have recognized the potential of partnering with the university schools of business and management.

If our businesses are to be competitive long-term, we need to teach knowledge-based skills at both the high school and university levels. The days of highly paid "no skill" jobs have been over for years. Many union officials are in denial. These jobs have been outsourced to China and elsewhere.

Sir Conan Doyle summed up this whole subject neatly in "The Adventures of Sherlock Holmes" (1892): "My name is Sherlock Holmes. It is my business to know what other people don't know."

Mr. Holmes' cryptic remark unwittingly gave Americans a 21st century road map for a knowledge-based economy.


John Reiniers, a regular columnist for Hernando Today, lives in Spring Hill.



http://www2.hernandotoday.com/content/2010/feb/14/paradigm-shift-economics-and-education/