Tax and They Will Come

Richard Caldwell, a Wheeling native and the vice president for the Appalachian region of Audubon Engineering, said Charleston was chosen because of the availability of skilled and experienced workers. Availability of the Marcellus Shale natural gas reserve also was a contributing factor in the decision to come to West Virginia, he said.

Last week, we issued a policy memo highlighting the lack of empirical evidence in the Marshall University study that concluded  state and local taxes rates are a significant factor in business location decisions. The news that Audubon Engineering, a natural gas and oil consulting firm, is locating in Charleston, WV confirms why the “don’t tax and they will come” argument is largely baseless. As we’ve shown in the past, there is no obvious correlation between state and local taxes and state job/gsp growth. If West Virginia taxes are so high and uncompetitive, why didn’t Audubon Engineering locate in Ohio or Pennsylvania? This is not to suggest that taxes do not matter. They matter. Just not as much as industry wants you to believe. They are a small part of the cost of doing business and they are deductible against the federal corporate income tax. As former Alcoa CEO and US Treasury Secretary Paul O’Neill said:

As a businessman, I never made an investment decision based on the Tax Code…(I)f you are giving money away I will take it. If you want to give me inducements for something I am going to do anyway, I will take it. But good business people do not do things because of inducements, they do it because they can see that they are going to be able to earn the cost of capital out of their own intelligence and organization of resources.

Leave a Comment