The author notes:
“Still, the concentration of American corporate might is stark. Nearly 40 percent of all public companies are in just four states: California, Massachusetts, New York and Texas. Three of them — California, New York and Texas — account for a third of the Fortune 500.
And the trend is accelerating. In the last 12 months, California, Massachusetts, New York and Texas accounted for 50 percent of all initial public offerings by operating companies, according to Standard & Poor’s Global Market Intelligence.”
But the journalist naively asks: what accounts for the differences between states? And then argues the difference is not lower state tax rates. Difference in state tax rates are dwarfed by the synergistic value of clustering into communities of experts like Wall Street and Silicon Valley that increase the payoff for risk-taking and the certainty of those payoffs. The success of these states show that increased payoffs drive increase risk-taking, and that successful risk-taking gradually produces valuable institutional capabilities that enhance the productivity of workers. We can tax success, slow risk-taking, and gradually slow the formation of these institutional capabilities, just as it is slower in states without these valuable clusters.