Our governors are primarily interested in big businesses because it is far easier to collect taxes from them than from small and medium-size firms. The problem is that this has become the deciding factor for governors when they determine which enterprises to support in their region’s development.
This is not just theory. In his soon-to-be-published book, “Representation through Taxation,” Scott Gehlbach, a political science professor at the University of Wisconsin-Madison, gives a detailed analysis of this phenomenon in the Pskov region during the late 1990s. Rather than channeling resources into sectors in which the region enjoys a relative advantage, such as tourism and transportation, the Pskov governor focused on alcohol production. Gehlbach writes that this was not simply because of the steady demand for alcohol, but because it is easier to collect taxes from this sector.