Whoa—in this day and age it is news when politicians stand up and say they favor raising taxes. Not a good way to get re-elected, especially when most people count every penny they have and don’t feel particularly secure financially. But in Illinois the lame duck legislature did more than just raise taxes in an attempt to balance the budget—state lawmakers enacted a whopping 67% increase in the state income tax and a 45% increase in the corporate tax.  So the new governor in Wisconsin is inviting business from neighboring Illinois into his state—we’ll tax you a lot less, he says. He’s sort of taking a page from Texas.

Down in Texas, the locals for years have been touting their “business friendly” state—which is code for no income taxes and no unions. Texas is a lot different than Illinois, which is more pro-union and I guess not as business friendly especially after this tax hike. And then we have Arizona, which is very business friendly and also right to work. Arizona has low taxes too, naturally, but just cut funding for liver transplants as well as mental health care, and wants the budget-busted federal government to build a border fence.

So maybe all this business friendly stuff makes some sense. No doubt those really big less than business friendly states are having a really tough time: California has a nearly $30 billion budget deficit. New York’s budget deficit stands at about $11 billion and growing. Pennsylvania is at $5 billion and counting too.

But is business friendly the answer to balancing the budget and fiscal responsibility— we’re taught by our supply-side friends who like business friendly that low taxes mean more business and that leads to more tax revenues. But turns out business friendly states have their own problems. Wisconsin faces a nearly $3 billion budget shortfall, Texas (that’s right Texas) is down $20 billion, and Arizona needs another $2 billion even with so much business friendliness. In fact, Arizona to keep things business friendly now talks about eliminating more indigent medical care. That is friendly indeed.

Now is it surprising that the real estate markets everybody wants to invest in are generally in less than “business friendly” places—New York, Washington DC, Boston, LA,  and San Francisco have some of the highest combined taxes of anywhere in the country? Are commercial real estate investors flocking to Phoenix, Dallas, and Orlando right now because of no state income taxes? Are our cities with the lowest taxes the better real estate markets?   If you’re going to invest in a downtown, do you pick Chicago, Illinois or Milwaukee, Wisconsin? Is the Commodity Exchange suddenly going to move to Madison or Lake Geneva? Why doesn’t Wall Street leave for San Antonio or Oklahoma City? And why isn’t Silicon Valley picking up and transferring to Tucson? Don’t they like business friendly? Or is the Wisconsin governor about to coax a business stampede into the cheese-head state?

I’ll say this much—at least the Pack has a good shot next Sunday against the Bears.      

To be continued…