From time to time, there is talk about tinkering with the tax breaks enjoyed by the financial services industry in Delaware.
The recent actions by Capital One, which plans to actually add jobs after the acquisition of Wilmington-based ING Direct, offer a sobering reminder of the willingness of big financial services companies to quickly respond to changes in the banking environment.
Capital One recently acquired credit card assets of HSBC and quickly announced plans to close an 850-employee site in Salinas, Calif. SEE STORY. The site had been on the bubble for years, with the state’s business and tax climate always looming in the background.
Operations in South Dakota, which offers generous tax treatment, will expand. CLICK HERE for the press release.
A couple conservative economists and public policy types in Delaware several years back predicted the flight of financial services jobs from Delaware to places, like South Dakota, thanks to Delaware’s high personal income tax rate and high state spending.
For the most part that did not happen, thanks to the work of governors, the state’s legal community and the General Assembly.
That effort, which continued in a tough economy, allowed Delaware to keep its biggest advantage, a high-quality workforce that can deal with the changing environment facing banks in areas ranging from technology to regulation. A location along the Northeast corridor is another big plus.
None of this can taken for granted. South Dakota has built the same skilled workforce for two decades and technology has reduced the drawbacks of operating in the nation’s “empty quarter.”
Still, it would take only a couple of bad moves from Dover and the governor’s office to change the competitive situation.
As a new generation of more partisan and polarized politicians in both parties the decision in Salinas should be kept in mind.
