Kansas Health

A disservice to Kansas

[Nick Gillespie, "Jayhawk Down," Reason, 18 November 2004.]

Although his tongue may be planted in his cheek, Reason editor Nick Gillespie makes a serious charge in this recent column - it doesn't matter what tax rates are like in states like Kansas, because no one cares:

If you had to choose somewhere to live, would you really go to Kansas if you could figure out any way, short of acting in porn or in a dinner-theater version of Rent, to stay in New York?

The simple fact is that many people—arguably most people—are ready, willing, and able to pay a premium to live in more densely populated areas where things cost more money and take more time, where there are more regulations, higher taxes, bigger annoyances, you name it. That is, where the hassle factor, including man-made petty annoyances such as taxes and regulations, are higher.

And the folks at Forbes and the Pacific Research Institute are unlikely to be trekking en masse to Kansas anytime soon. Why is that? Because most of the time, economic freedom's just another word for nothing else to do.

The problem with the logic here is that it basically provides politicans a free ride. Regardless of whether you are in a popular destination on the coast or a rural area in the heartland, people will come or go no matter how much you tax or regulate based on other factors.

This ignores the phenomenon of people who move to cities at a young age and then make the switch to suburbs as they age, have families, etc. This can take place at the state level, as well. Every year, there is a fresh crop of recent graduates that head to places like New York or D.C., and every year, there are those who decide the negatives that come with those places outweigh the amenities Gillespie speaks so highly of. Over time, links to friends and family back home may become more important than the flashing lights.

The other issue here is that there is a definite correlation between high taxes, burdensome regulation, and impaired economic growth. As Ohio University economist Richard Vedder has shown, economic growth and productivity declines as taxes and regulation grow. While Kansas cities may not have the draw that New York or L.A. does, that does not mean that policymakers should not attempt to compete where the state has the potential for a comparative advantage - those lower taxes and fewer regulations. Foreign companies looking to locate plants in the U.S. are not locating in New York City, for example, rather they are often building in rural areas. Some investors apparently value what they can find outside of major metropolitan areas.

In fact, by emphasizing the flashy glitz of the big cities, Gillespie may even be encouraging politicians to avoid the real work of addressing these deficiencies and instead focus on areas where there is definitely no comparitive advantage - sports arenas, for instance.

Some people may be willing to make some trade-offs to live elsewhere, but it is those on the margin that policymakers should work to retain or attract.