Pay-To-Play Would Hurt Job Growth
Earlier this week, there was a great editorial in The Miami Herald by Glenn Garvin. Garvin argued that the pay-or-play provision (that “would require almost all businesses to either provide health insurance for their employees or pay a tax penalty of up to 8 percent of their payroll”) is a bad idea. He wrote that:
At a time when American businesses are going bankrupt at a rate of 240 a day, when the unemployment rate is 9.5 percent and headed north, does it make sense to impose any new taxes on business? What if play-or-pay leads to a third option: taking your ball and going home?
Towards the end of the editorial, Garvin discusses long-term effects of the pay-or-play provision:
How much more often will you call customer service and find yourself speaking with somebody in New Delhi?
This is a reference to the well-documented “race to the bottom” where countries that offer lower taxes and fewer regulations enjoy more investment, immigration, and job growth. The same occurs on a state-by-state basis within the United States. Richard Vedder of The Heartland Institute wrote about this back in 2005:
The skeptical reader might say people left high-tax states for reasons other than taxes, and moved into low-tax states for non-tax reasons. While it is true many non-tax factors influence migration, more sophisticated econometric analysis confirms that, controlling for other factors, the negative tax-migration relationship exists. The relation holds if international migration (immigration) is taken into account as well.
This is a worthwhile phenomenon for state and national policymakers to consider when crafting legislation. Especially, in light of the Sacramento Business Journal reporting today that 41 U.S. cities have double-digit unemployment.