Thursday, May 3, 2012

An Editorial in the Fort Wayne News-Sentinel Argues Against Economic Development Incentives


From Tyler A. Watts, Ph.D., of the Indiana Policy Review Foundation in the Fort Wayne News Sentinel:


Possibly the most egregious of these practices is the widespread use of “economic-development” tax credits. Bribing large companies to set up shop in their districts is a hackneyed job-creation game that local pols and economic-development bureaucrats have been playing for decades. It's also a gross violation of one of America's founding legal principles: the idea of equal protection of the law. Targeted tax cuts mean government is applying different rules to different people.

Such policy says, “If you're a large company with a visible impact on the labor market, we'll subsidize you. If you're too small to make headlines with large job promises, you pay full price for the blessings of government.” And although this “press release economics” has been tried all across the state, it's unneeded at best and counterproductive at worst.

Truly productive enterprises — i.e. those whose costs are less than their revenues — don't require government subsidies. Subsidizing private industries simply generates temporary spurts of artificial growth that comes at the expense of genuine economic development.

All that's needed to maximize economic growth is low and uniform taxes, wherein politicians can't pull strings and play favorites through the tax system. “Broaden the base, lower the rate” is a proven formula for growth; targeted tax cuts are a proven formula for wasteful special-interest favoritism.


If we can get state government wholly focused on its core competencies of providing public goods like highways and the legal system, and end the attempts to micromanage and subsidize growth, our state's economy will flourish like never before.

If you like our growth rate now, just wait until we leave all economic development decisions to the entrepreneurs instead of the politicians and bureaucrats.