Editorial Staff

Study Says Interstate Tax Competition, Relocation Subsidies Exacerbate Telecommuting Trends

/in , , , , /by Editorial Staff
Share on Facebook
Share on Twitter
Share on
LinkedIn
+

BOSTON – A spate of new incentive and subsidy programs seeking to lure talented workers and innovative businesses away from their home states could constitute an additional challenge to Massachusetts’ economic and fiscal recovery from COVID-19, according to a new study published by Pioneer Institute.

In recent years, dozens of cities and states around the country have begun subsidizing moving costs, housing prices, and even student loan payments for new residents, usually in an effort to expand their tax bases and boost their economies. As employers are pressured to allow telecommuting more broadly after the pandemic, this, coupled with high housing costs in Massachusetts, leaves major job centers like Boston vulnerable to an exodus of economic activity.

“Between the soaring costs of living, rise of telecommuting, and incentive programs to move elsewhere, it’s a perfect storm,” said Andrew Mikula, author of The Big Lure: Interstate Competition Exacerbates the Economic Fallout from Telecommuting Trends. “With such a fluid situation on workforce mobility, no one can take for granted that Boston’s past labor market advantages will protect it from the effects of a business-unfriendly environment in a post-COVID world.”

Of the 37 U.S. cities that pay residents to move there, 28 have median housing prices less than half that of Massachusetts, according to MakeMyMove.com. Several in the rural Midwest, where real estate is especially cheap, will give land to newcomers for free. Others focused on attracting younger talent offer free WiFi, access to coworking spaces, and, in Northwest Arkansas, even a brand-new mountain bike.

While it’s too early to know whether these programs actually translate into long-term economic benefits for the cities and states they aim to revive, the sheer scale of interest in “pay you to relocate” deals should be concerning to those in traditional job centers. Tulsa, Oklahoma, a city of 400,000 people, has received more than 20,000 applications for its relocation incentive program since 2018. Topeka, Kansas, population 130,000, received over 3,500 within its program’s first 30 days. The COVID-19 pandemic has already reduced the number of jobs in Massachusetts, and programs like these could make it easier for workers of all stripes to leave as well.

The new study also emphasizes the lengths to which jurisdictions have gone to attract corporations across state lines in recent years, with tax breaks associated with landing Amazon’s second headquarters and Wisconsin’s Foxconn deal being prime examples. A 2020 Princeton study found that U.S. state and local governments use tax incentives to lure companies worth at least $30 billion annually. In 2018, at least 11 proposals for Amazon’s second headquarters were valued at $1 billion or more.

These economic development strategies may in part explain the steady increase in the share of corporations that change locations in a given period. In the 1990s, the three-year migration rate for large firms in the U.S. was about 3 percent. By the early 2010s, it was nearly 6 percent.

“Attracting and retaining talent has been a big part of the Boston renaissance,” said Pioneer Institute Executive Director Jim Stergios. “As we come out of the pandemic, we know that telecommuting trends will continue to change the calculus on where to locate. With cities and states offering our younger, highly mobile residents and start-ups cheaper and roomier locales as well as generous subsidies, state policymakers should avoid tax and regulatory policies that exacerbate the cost of living and doing business in Massachusetts.”

About the Author

Andrew Mikula is Economic Research Analyst at Pioneer Institute. Mr. Mikula was previously a Lovett & Ruth Peters Economic Opportunity Fellow at Pioneer Institute and studied economics at Bates College.

About Pioneer

Pioneer’s mission is to develop and communicate dynamic ideas that advance prosperity and a vibrant civic life in Massachusetts and beyond. Pioneer’s vision of success is a state and nation where our people can prosper and our society thrive because we enjoy world-class options in education, healthcare, transportation and economic opportunity, and where our government is limited, accountable and transparent. Pioneer values an America where our citizenry is well-educated and willing to test our beliefs based on facts and the free exchange of ideas, and committed to liberty, personal responsibility, and free enterprise.

Get Updates on Our Economic Opportunity Research

Related Posts:

Aki Balogh on How U.S. Diversity Drives Business

This week on JobMakers, host Denzil Mohammed talks with Aki Balogh, immigrant from Hungary and cofounder of MarketMuse, which created an artificial intelligence powered content intelligence and strategy platform; and cofounder of dlc.link, which aims to decentralize Bitcoin. Moving to the U.S. after fleeing post-communist Hungary, Aki and his family did whatever they could do to survive, and that included delivering newspapers and phone books, and even starting a computer repair business at 15, as a young teen.  Today, Aki is a pioneer in content intelligence technology and has created more than 90 jobs in the past eight years.

Chet Manikantan: Innovation Machine

This week on JobMakers, host Denzil Mohammed talks with Chet Manikantan, immigrant from India and founder of Aegis Studios, which builds crypto games. Chet was founder of a string of companies and a partner at two venture firms, but he was almost denied the opportunity to innovate and create jobs in the U.S. by our outdated immigration system, if not for a chance encounter that led to a workaround for select foreign-born entrepreneurs. And he’s keenly aware and grateful that this country gave him what he needed to succeed, as you’ll learn in this week’s JobMakers podcast. 

Pedro Zamora on Immigrant Entrepreneurs in Kansas City

This week on JobMakers, host Denzil Mohammed talks with Pedro Zamora, executive director of the Hispanic Economic Development Corporation of Greater Kansas City. Pedro and his organization work on initiatives that are crucial to the economic vitality of the area, and they’ve helped more than 4,700 businesses. Immigrants there are having an outsized economic and cultural impact, and so Kansas City is yet another example of how localities can bounce back and benefit from immigrants and refugees, as you’ll learn in this week’s JobMakers podcast.

Survey of Business Sentiment: MA Income Tax Hike Would Lead to Employer Exodus

Nearly three quarters (73 percent) of Massachusetts business leaders think business associates will leave the state if a constitutional amendment appearing on the November ballot to hike taxes is successful, according to a survey conducted by Pioneer Institute.

Looming Budget Crisis Reveals MBTA’s Dependency on Federal Funds

0 Comments
/
The MBTA is about to lose federal funding at a critical moment when ridership has not yet recovered. Will the state make up the difference?

Mei Xu on the Slow Burn to Success

This week on JobMakers, host Denzil Mohammed talks with Mei Xu, immigrant from China and founder of Chesapeake Bay Candle, which was acquired by Yankee Candle parent company Newell Brands for $75 million. Mei describes the journey to entrepreneurship, including a rough start, with dashed dreams and miserable timing that forced her to create opportunities for herself. Today, she seeks to empower women business owners around the world, to show them that they too can expand economies and horizons with a little guidance.