For years, Indiana legislators have labored under the belief that keeping taxes low will spur business and economic development. The theory is that businesses looking to relocate will be lured to states where the tax burden is low, and businesses already here will be less likely to search for greener pastures. Economic development in turn will help stem the brain drain that has characterized our state for many years?the exodus of talented and educated young people who leave Indiana for jobs elsewhere.
For years, Indiana legislators have labored under the belief that keeping taxes low will spur business and economic development. The theory is that businesses looking to relocate will be lured to states where the tax burden is low, and businesses already here will be less likely to search for greener pastures. Economic development in turn will help stem the brain drain that has characterized our state for many years—the exodus of talented and educated young people who leave Indiana for jobs elsewhere.
What if this conventional wisdom is wrong? What if taxes are unrelated to our economic woes?
A recent story in the Indianapolis Star about efforts to stem the tide of Indiana college graduates leaving for jobs elsewhere had, as a sidebar, a graph showing retention rates of graduates in selected Midwestern states. Illinois, Kentucky, Michigan and Ohio all retain far higher percentages of their college graduates than we do. Illinois leads, with a retention rate of 81.6%. (By comparison, Indiana keeps just 57.8%.) The tax burden in Illinois is much heavier than in Indiana, and that is true of Ohio and Michigan as well. Evidently, job creation and economic development depend upon factors other than tax rates.
Could it be that quality of life matters more than taxes? When we look at the cities that attract people, especially young people, we find extensive parks, museums and libraries, major educational institutions and vibrant arts communities. In his book “The Rise of the Creative Class,” economic development expert Richard Florida describes the urban amenities that attract creative people, and explains why attracting them is important. In today’s world, cities and states that wish to flourish and attract new jobs must make themselves attractive to the emerging “creative class” because that is the class that is driving economic prosperity today. Workers no longer relocate to cities where the employers are—instead, employers increasingly relocate to cities with a skilled, plentiful and creative workforce.
Cities that attract creative class members have what Florida calls the “three T’s” necessary for a robust economy: technology, talent and tolerance.
Creative class people, according to Dr. Florida, want to live in places that are “wired,” places where there are other interesting and talented people, and places that are broadly accepting of difference. The way gays are treated, the vitality of the local arts community, the authenticity of neighborhood life, the presence of other creative folks—all are indicators they look for. (Fancy sports stadiums and generic malls aren’t.) Accordingly, cities like San Francisco, Boston, and Austin, Texas, rank high in their percentages of creative class residents. Southern cities generally rank poorly.
If one accepts Dr. Florida’s conclusions—and I think he makes a very persuasive case—what could Indianapolis do to attract more of the creative class? The Mayor’s cultural initiative, an effort to bolster the place of the arts in our city, is certainly a good start. Passage of an ordinance to grant employment benefits to the domestic partners of city employees, or inclusion of sexual orientation in the state’s civil right law, would be positive signals. Sufficient funding for the various local technology initiatives would be prudent. “Growing” IUPUI and other local universities is critical—Florida devotes considerable discussion to the importance of such institutions to the creation of a hospitable environment. We can and should take these, and related, steps.
It’s what Florida doesn’t discuss, however, that may doom Indiana and Indianapolis to permanent backwater status, and that is political culture. Tolerance? This is a state where legislators sue a state University in an effort to suppress a play that suggests Jesus might have been gay; where City-County Councilors vote against partner benefits for city employees and resist supporting the arts and the library budget. Authenticity? This is a city where people actually pay lots of money to live in places like the Faux Village of West Clay. Education? We won’t fund full-day kindergarten, we don’t pay for students’ textbooks, and we periodically try to turn our libraries into censors.
If we had more of the creative class, the culture would change. But we need to change the culture to get more of the creative class, and right now, the culture is firmly embedded in the philosophy of low or no taxes and damn the torpedos.
I guess we’ll continue to get what we pay for.