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BBA Economic Digest: Time Will Tell

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Time Will Tell

In last week's Digest, I told you about Peter Rex, a billionaire CEO who was the process of moving his company Rex Teams from Seattle to Austin. Rex made some rather inflamatory comments, at least to some, when he said he was making the move because Seattle had "become hostile to the principles and policies that enable people to live abundantly in the broadest sense." Read into that obtuse quote what you want, but I have to think that the cost of doing business played a key role. That said, the Seattle City Council last week passed what it calls a "JumpStart Tax," which is a payroll tax on the city's biggest businesses, including Amazon. Under the new law, businesses with at least $7 million in annual payroll expenses will be taxed between 0.7 percent and 2.4 percent on the amount they pay Seattle-based employees, with tiers based on individual salary amounts above $150,000. The tax would apply to about 800 Seattle businesses which are not in a specifically exempted category, according to the Tax Foundation. Businesses that are exempted include grocery businesses, nonprofits, independent contractors who are counted in the payroll of another business, and businesses that are exempt from city taxation by federal or state statutes (such as insurance companies, liquor distributors or sellers, gas stations, and motor fuel distributors).

Most U.S. cities and counties do not impose a local income tax, but they are imposed by 4,943 jurisdictions in 17 states, according to the Tax Foundation. All counties in Indiana and Maryland impose a local income tax.

In Ohio, 593 municipalities and 181 school districts have such a tax. 2,469 municipalities and 469 school districts in Pennsylvania impose local income or wage taxes. Many cities in Iowa and Michigan also have these taxes.

Income and payroll taxes are generally applied to those who live or work in a jurisdiction. They can complement or replace other local revenue sources like property, business, sales, or tourist taxes.

Unlike property taxes, local income taxes can also be applied to nonresidents. They come under a variety of names -- wage taxes, income taxes, payroll taxes, local services taxes, and occupational privilege taxes. They are generally paid by the employee but withheld by the employer.

Some are imposed as a percentage of salaries or wages, while others are stated as a percentage of federal or state tax, and still others are flat amounts charged to workers.

Local income taxes can potentially discourage economic development and drive out mobile workers and businesses. It will be interesting to see if any of the 800 businesses will shift operations out of Seattle in total or in part as a result of the new tax. Time will tell.

What Matters Most

Saying that you are proud to be a member of a team that is trying to recruit a business to your community really falls short. That merely says you are proud to compete, proud to be in the hunt, which doesn't say much. What matters most is addressing the needs and values of the customer. If your team does that, then you have reason to be proud, win or lose. I'll always remember what the chairman of an economic development organization in Alabama -- a man who described himself as "a simple cotton farmer" -- said to representatives of an industrial prospect in my presence years ago. "What's important to you is important to us." Finding out what the customer values as important is key to successful economic development, and not just in business recruitment but also for business retention and expansion as well as entrepreneurial development. Do that and you've accomplished something. But don't be too proud and never be satisified that you are doing enough.

Photo by Dan Meyers on Unsplash

Our Pioneer History of Defiance

We as a nation have put a man on the moon and roving machines on Mars. We have turned out more Nobel laureates than any other.

And yet in many ways we have a long history of flouting authority and disregarding science going back to our earliest days as a nation.

It is our distinction that the United States has the highest number of Covid-19 cases in the world -- 3.2 million and counting -- and most the deaths, now at more than 134,000. The floundering U.S. response casts may be rooted in our pioneer spirit. From the pilgrims’ landing place of Plymouth Rock to the California Gold Rush, successive waves of pioneers battled the elements to carve out a new life.

“They saw themselves as self-reliant and they considered no man (and certainly no woman) their superior, regardless of greater experience and education,” wrote Elizabeth Cobbs, a history professor at Texas A&M University and a senior fellow at Stanford’s Hoover Institution. Fast forward to today. Anthony Fauci, the Brooklyn-born scientist who has headed the National Institute of Allergy and Infectious Diseases since the 1980s, has been cast as a meddling Easterner by some. Dan Patrick, the Texas lieutenant-governor who opposes laws requiring the wearing of face masks, said Dr. Fauci “doesn’t know what he’s talking about” and Texans “don’t need his advice anymore.” His intolerance of Fauci’s advice (and that is all it is) is shared by bare-faced citizens busting their way into stores and picking fights. “Scorn of older society, impatience of its restraints and ideas, and indifference to its lessons” has long characterized the frontier mentality, wrote historian Frederick Jackson Turner In his landmark 1893 essay, "The Significance of the Frontier in American History.”

Yet there is a flipside to the story on our pioneer spirit. Just as there is the dark, there is the light. Witness the U.S. space program, which spurred innovation and cooperation.

“We choose to go to the Moon in this decade and do the other things, not because they are easy, but because they are hard,” President John F. Kennedy famously said in an address at Rice University in Houston on Sept. 12, 1962.

“Because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one we intend to win, and the others, too.”

Most Americans have confidence in the expertise of U.S. scientists; however, the pandemic is but the latest example of science being politicized. Debates have raged over the veracity of evidence-based claims about the risks from cigarettes, climate change and vaccines.

According to a Pew Research study last year, party affiliation does matter when it comes to science and public policy debates. Some 73 percent of Democrats and Democrat-leaning independents think scientists should inform science policy making, while only 43 percent of Republicans and those leaning toward the GOP do.

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Leveraging Ignorance

I am no longer surprised by the pomposity of some consultants who purposely promulgate an air of being all knowing. It's really part of their schtick and they relish the role. Sadly, many economic developers enable this bad behavior. But not all. A growing number question the emperor has no clothes outlook. Wrote one economic developer to me from Oklahoma last week,"You know how I feel about some consultants and the attitude and ego." Yes, yes I do. Last week, we debuted a new BBA service called Virtual Solutions. It is based on Peter Drucker's belief that experience and knowledge should not be relied upon in consulting, but rather asking "the right questions." Drucker, known as the "father of modern management," said he actually leverages his lack of knowledge to serve a client. "Ignorance is the most important component for helping others to solve any problem in any industry," he said. We agree. It's not what we know that matters but rather what we will find out.

Photo by Sean Stratton on Unsplash

Developing a Growth Mindset

I really enjoy talking to economic developers, which is something I try to do on a daily basis. From them, I learn about what they are thinking, which usually centers on what they most value. During those conversations, I will sprinkle in a few simple questions, with the belief that simple questions can be the most profound. Answering them frequently requires stark and honest, sometimes painful, self-assessments. Last week, I had an hour-long virtual meeting with an economic developer who I've long known and considered to be a thinking man. As someone who is always in pursuit of more answers, he is never satisfied. His attitude personifies continous improvement, which is a growth mindset. It is what is required to make things happen. More often than not, improvement comes with small, incremental changes that can lead to better results.

No Big Deal

Barking dogs, screaming children, and cats on laps might not normally be welcome at a business meeting, but their presence is common during work-at-home days.

Last week, I was on a Zoom call with a person who was giving me a topnotch presentation and she was stressing out because the dog was barking and that someone rang her doorbell. "Hey, it's Ok," I said. "You're doing fine. No big deal." These times are stressful enough without adding in worries about things like dressing professionally or having a pristine workspace in the background during video meetings. When I participate in Zoom conferences, I'm often out on the porch, wearing a T-shirt and sunglasses. A trusted colleague at BBA said my screen image reminded him of Walter White from Breaking Bad. My advice: Let others be themselves while working at home, and be yourself as well. Making connections and bonding with others is what matters.

What We're Reading and Watching

Why workplace diversity efforts are failing CNN Business

As a Flag Comes Down, Looking for a "New Mississippi"

New York Times

Who Invented the Wheel? And How Did They Do It? Wired

Lost Lineage: The quest to identify black Americans’ roots

Washington Post

How to Talk So CEOs Listen Forbes

Honky-Tonk Tokyo AFAR

Family Strings (below) -- What Would You Give

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