The states should be abolished.
Well, OK, maybe not abolished per se. But they are detrimental to the proper functioning of the economy, as they currently exist.
What raises this issue, not for the first time, in my mind is the worry, in Hoffman Estates, Illinois, about what may happen if the suburb's biggest employer, Sears, should pick up and leave.
Why should Sears do this? Because Hoffman Estates, and Illinois, dares to apply to Sears the tax rates that apply to everyone else. In Illinois, I mean. Other states will bid for the privilege of having Sears move its headquarters to their locales; and the primary thing they have to offer is tax breaks.
That's why Sears went from downtown Chicago to the boondocks in the first place, of course: the town of Hoffman Estates gave Sears zillions of dollars worth of tax breaks in return for Sears's relocating to their village, back in 1989. The deal expires next year, and so Sears is now seeking another tax exemption, from another state. Of course, it would also be willing to consider a suitable extension of its current tax exemption, in return for staying where it is.
States want companies like Sears; they employ large numbers of people (about 6,000, in the case of Sears), and this brings prosperity in the form of all the money that is spent locally by those thousands of employees.
Trouble is, those thousands of employees have multiple thousands of kids, who need schools. And the thousands of families need parks, and streets, fire departments, and infrastructure of diverse and complex nature. The employer, in the normal circumstance, pays property taxes on its facilities to help build those schools and hire those firemen.
When localities or counties trade long-term tax "holidays" to specific companies in return for the gift of a headquarters facility, or a big plant, to be located within their boundaries, they essentially render themselves hostage to the company.
So now, Hoffman Estates has a gun to its head: if Sears leaves, people will leave. Housing prices will fall; a big facility will become idle; schools will empty; and so forth. Sure, they need the tax receipts, but the village also needs the company's presence. And suddenly, the company has suitors from all over the country.
So states and municipalities enter into a bidding war for the prize of the company's presence on their soil. The states engage in a race where the winner impoverishes himself.
More on this later. But it seems obvious that, when you have dozens of different administrative districts (our states) racing to the bottom in this way, everyone is worse off.
Oh yeah: except for the big corporation.
