Tuesday’s Wall Street Journal carried an article by Liz Hoffman about Pfizer Inc.’s pending offer to buy AstraZeneca for nearly $100 Billion dollars. The essence of the article is found in the first paragraph:
America’s liberals, including those in Oregon, continue to fail to understand that one of the most important elements of wealth is mobility. The technology revolution that has so enhanced our communications capabilities has also enhanced the ability to exercise that mobility. Initially, mobility chased market opportunities. Proximity to markets or to resources were the major considerations for business and business leaders who made the decisions for business located or relocated to enhance those opportunities. As transportation improved and products evolved – particularly with the advent of computer driven industries – proximity to markets began to ebb as the critical element. Cost became king.
As governments (local, state and federal) increase the cost (tax and regulatory) on business, mobility becomes one of the primary means of avoiding those burdens. The same can be said of labor costs – punitive wage and work rule demands coupled with gold-plated union benefits have resulted in an ongoing migration from heavily unionized states to right-to-work states.
What makes this story unusual is found in the following paragraph:
So when Boeing, Inc. moved its corporate headquarters from Seattle to Chicago it did not discuss the burdensome effect of Washington’s gross receipts tax on business. It didn’t discuss the nearly four decades of labor unrest spurred by local unions who thought Boeing manufacturing was captive in the Puget Sound area. And it didn’t discuss three decades of state and local governments who treated Boeing as their private piggy bank. Even as Boeing was walking out the door those primarily responsible for the abuses held firm to the belief that while the headquarters of Boeing may shift to Chicago, its manufacturing was immovably rooted in Seattle/Everett. For the rest of us who have observed business for years, we recognized that this was just part of the ongoing migration strategy to reduce labor and government costs and that it would continue for the foreseeable future. Just recently, Boeing announced that it was moving 700 engineering jobs and 1500 information technology jobs from the Puget Sound area to South Carolina. And those announcements will continue as Boeing phases out its exposure to the punitive effects of Washington state government and the unions it despises. Boeing was, and is, exercising its mobility prerogative as a prudent act of business.
Boeing is not an isolated incident. It is, in fact, descriptive of a whole host of businesses that relocate from their points of origin. They do it bluntly by moving significant portions of their operations, they do it subtly by choosing to expand elsewhere, and they do it conclusively by selling to others located elsewhere.
Each year ChiefExecutive.net surveys chief executive officers from across the nation on the best places to do business. In 2012, Oregon dropped nine places to forty-second. The survey reports actual comments by some of the CEOs:
The ability to avoid tax burdens also drives the decisions of those who have accumulated wealth in their post-managerial days. One only has to look a list of previous chairmen of the Portland Business Alliance and the Oregon Business Council to see those who have left Portland for Washington, Nevada and Arizona prior to retirement payouts or stock option conversions. (The irony here is that in many instances those executives have supported tax increases that they now avoid by leaving.)
On a national level we have seen a spike in the number of people – all wealthy – who have renounced their citizenship so as to avoid the increasing federal tax burden. Forbes magazine, in a February 6 article by Robert Wood noted:
“That brings the total number to 2,999 for all of 2013. The previous record high for a year was 1,781 set in 2011. It’s a 221% increase over the 932 who left in 2012. ”
Government policy, including tax policy, are a competitive factor. Those who choose to ignore it are destined to decline like Detroit and those who seize as a competitive advantage are destined to prosper like Texas. The opinions of the government class in Oregon foretell its destination and, right now, it ain’t looking pretty.