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Portland Asks Businesses to Move Elsewhere

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Tags Taxes and SpendingPolitical Theory

12/10/2016

Okay, maybe not exactly. They are using state coercion to force companies not to pay their CEOs more than 100 x the companies' median employee. Businesses in Portland, OR, who pay such "too high" salaries to their CEOs will be hit by a 10% surcharge on their taxes. This, if policy-makers and other economic illiterates are to be believed, will make Portland more equal.

They probably think businesses will stay in Portland, and possibly even move to Portland, despite this new rule.

The real and highly predictable outcome of this type of policy, however, will be rather the opposite. While there is quite a bit of wiggle room in how businesses can calculate who is the "median employee," the high cost of moving from one location to another will keep businesses in Portland. At least for a while. Over time, however, there is no doubt that (1) many businesses who were considering it will not move to Portland; (2) businesses in Portland will move out sooner and in greater numbers than otherwise would be the case; and (3) large businesses in Portland will have a much harder time hiring (and keeping) highly skilled CEOs and will consequently be less efficiently managed - and can therefore not expand or keep staff to the degree they otherwise would have.

Of course, these predictions are ceteris paribus and compared to the alternative future. Should President-elect Trump choose to for example raise trade barriers throughout but make Portland, OR, a free trade haven, then the city would of course thrive. But it still wouldn't thrive as much as it would have without this policy.

The long-run result of this policy is without question a less productive economy, which will mean fewer jobs and lower incomes. No policy can undo or bypass the effects of economic law. Portlanders may believe they have done just that, but they've only made sure they will be relatively less prosperous in the future. Which, of course, means they will - in a very sad way - be more equal. As the pie shrinks, so will the absolute differences in people's slices.

It is difficult to identify winners in such a destructive race to the bottom. But perhaps Portland's progressives plan to counter the economy's decline and possible free-fall by prohibiting gravity? All it takes is a vote and a policy.

Author:

Contact Per Bylund

Per Bylund is assistant professor of entrepreneurship & Records-Johnston Professor of Free Enterprise in the School of Entrepreneurship at Oklahoma State University. Website: PerBylund.com.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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