Posted on 05/18/2015 7:57:29 AM PDT by reaganaut1
One of the great bipartisan follies of American politics is the idea that the way to make your state (or city) more prosperous is through corporate welfare – in particular, policies meant to lure in companies with cash, tax breaks, or both. Rare is the politician in either party who dissents from the conventional wisdom that it’s the government’s task to “improve the economy” by using targeted incentives.
At best, this is a zero-sum game. The commerce and jobs that a city or state gains would have located elsewhere if it weren’t for the incentives. While a small number of residents benefit from the fact that the business located there, the overwhelming majority of the rest of the people aren’t affected. Of course, the politicians will crow that “the state gained jobs” and to people accustomed to thinking in abstractions, that sounds good.
Not infrequently, the results of these incentives make it a negative sum game. Here’s an example. In 2011, North Carolina spent $20 million to induce Chiquita Brands to move its corporate headquarters from Cincinnati to Charlotte. That was nice for a very few Charlotte residents, but it made no difference at all to the rest of the state’s population, hardly any of whom even knew about this “win” for the state.
But after a corporate buyout of Chiquita Brands last year, the company’s new Brazilian ownership decided to close the Charlotte headquarters. Money that could have gone into something of lasting benefit for far more people (better road maintenance, for example) was squandered on the corporate welfare game. (As we read in this Charlotte Observer article, Chiquita has promised to repay the money it got from the state, but that’s uncertain due to the company’s shaky finances.)
(Excerpt) Read more at forbes.com ...
What major corporation don’t own a senator or congressman they are cheap and easy.
Corporate welfare has gotten out of hand and benefits the large businesses while locking out the small businessman.
It is a cancer around Austin. City and state want to give big incentives to every Fortune 1000 company they can while giving the finger to mid-sized and mom & pop businesses. Not to mention the side effect of a net growth of 130 a day in the Austin area and most are not Texans.
Where does “corporate welfare” end and “get out of the way so business can flourish” begin?
Instead of spending money on government bureaucracies that are supposed to outbid other such bureaucracies for firms that might relocate or expand, and then spending far more to seal their deals, why not follow Smith’s counsel? Establish the conditions that are conducive to investment by everyone, then let individuals take over.
Sound council.
However it is unlikely to be followed by today’s politicians who are slaves to the popular media.
Politicians have to go before the bright lights and cameras of the media and expound on what they have done or are going to do to improve the lives of their constituents.
Add to that the fact that those who seek power are typically people that want to use power. Even the Conservative Republicans want to do something to garner the attention of the press.
Then there is the fact that it takes a lot of money to gain office and more money to keep that office. The people that have the money want something in return for that money. That usually means favored treatment in legislation.
While I believe whole heartedly in that what is described above is the best practice of government I doubt the US will return to that theory of government any time soon.
Someone suggested that these intellectual prostitutes be treated like NASCAR drivers and wear jackets with the logos of all their sponsors.
The author makes an argument very weak on logic.
First, if the money is in the form of tax breaks, then the community is out nothing if the tax break is the only reason the company comes there instead of elsewhere. If the company does not come, tax revenue is zero. If the company comes, tax revenue is actual taxes minus the tax break, which in most cased is greater than zero, so the community benefits.
Second, the effect of a job in a community is not limited to the person holding the job. People owning and working at retailers, gas stations, schools, restaurants and repair shops benefit when others in the community have employment. When a dollar enters a community as wages, a large part of that dollar stays in the community and cycles through the economic system. In economics, it is called the multiplier effect.
It is possible for a community to make poor decisions and invest unwisely, especially if the incentive is in the form of up front cash payments or prime land grants, but a blanket argument against tax incentives is generally inaccurate.
It absolutely makes sense for a state or community to provide incentives for businesses to relocate.
The benefits extend to the people who get employed, local businesses where those employees spend their money, the state income tax, the state sales tax, the community sales tax, the property taxes on increased land values, etc. And other businesses that provide parts, supplies, or services to that business will likely relocate near them.
Whether it makes sense depends on how much incentive is offered vs the benefits incurred. Yes there is risk that the company might pull out or go under and that should be taken into consideration.
To make a blanket statement that at best it's a zero sum game is ludicrous. It's certainly not a zero sum game for the local community or state. It's probably not even a zero sum game for the nation. As pro business incentives that result in people being employed are good for the nation.
If my city or state elects to hand out tax breaks to keep or entice new businesses, more jobs and grow the local economy - then fine. Let the losers who refused tax breaks continue to decline as they see jobs leave and local taxes are increased.
Football stadiums and car manufactoring plants will not come if there are no incentives.
Kickbacks for Corporate campaign funding. This is sick.
That’s a sound idea however they would have to don a jacket and a over coat.
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