Killing the Goose
In Massachusetts, the government is all in a dither about the health-care crisis supposedly gripping the state. And two of the leading Democrats, the President of the Senate and the Speaker of the House (both houses over 84% Democratic) have apparently worked out a deal: any employer with ten or more employees will have to offer them some form of coverage, or pay $295/year per employee that would go towards public health care.
Setting aside the notion that the moneys would, indeed, be used for such a purpose (I don’t think the Massachusetts legislature has EVER respected an “earmarking” of funds, instead just tossing it into the general fund and spending it on whatever tickles their fancies), I think this could have a tremendous boost to the economy.
Well, the economies of neighboring states, especially us here in New Hampshire.
Massachussetts politicians would be wise to learn a valuable lesson: You can shear a sheep again and again, but skin him only once. Massachussetts, like most populous states with larger cities, have a nearly-captive audience. There are a lot of reasons that people want to live in Boston; having visited the city, I enjoy it. With such a captive audience, it is a lot easier to extract taxation from your state.
I liken it to poker. If you’re an expert poker player, and you’re trying to get into a weekly game with your buddies, you don’t want to send them home broke every week, or suddenly your buddies will have “prior commitments” spring up. The game won’t last too long, because below-average poker players like to win at least often enough to think they’ve got a chance. The optimal strategy is to win, but not to punish people you expect to play in the future. (Of course, in a tournament, or if you’re playing in a casino, where you won’t play those people again, all bets are off. Play all-out.)
The same rule applies to tax policy. You push, and you push, and you push, and the system creaks and groans, but holds up against the pressure. Then you push a little farther, and people give up. Massachusetts is one of the few states in the country to lose population year over year. Even states like California, which lose large numbers of residents each year (a statistic I’m glad to be a part of), have enough immigration to offset the loss. Massachussetts isn’t called Taxachussetts without reason. And now they’re piling one more big tax on top of it all.
Cities like Boston, New York, Los Angeles, Chicago, San Francisco, are like geese who lay golden eggs. You treat them right, and they’ll pay off for a long time. But when you try to take it all at once, don’t be surprised when the golden goose stops producing.