The headline recently on a column in the Sarasota Herald-Tribune did the job. It caught our attention:
“Economic incentives: necessary, transparent and effective.”
With all due respect to the author, a good guy doing his job, Mark Huey, president and CEO of the Economic Development Corp. of Sarasota County, we would argue: Quit trying to fool the public and justify what is as immoral as the personal income tax. That is, the government taking wealth by force from one to redistribute to another more government-favored recipient.
That’s what economic incentives really are — a subsidy, corporate welfare, the government picking who it wants to favor. But they are done so always as “investments” in name of creating jobs and what Huey termed “creating a more sustainable economic future.”
Wrote Huey: “To not have incentives would ignore the free-market reality that businesses can take their jobs anywhere, and communities throughout the country and the world are willing to pay incentives to win those jobs. Any community serious about competing for quality jobs … must be able to offer competitive incentives.”
This reminds us of the retort from the late Milton Friedman when Forbes magazine interviewed him on the subject of “economic incentives.” Told that economic development officials all say what Huey says — that a city, county and state must offer subsidies to be competitive and because everyone else does it, Friedman replied: “Just because your friends jump off a bridge, would you jump too?”
They’re an epidemic.
Perhaps most shocking lately are the television advertisements from the state of New York. In October, Gov. Andrew Cuomo launched Start-Up NY. Cuomo promises new, expanding or relocating companies that set up shop in certain tax-free zones no taxes for 10 years — no local taxes; no sales tax; no property tax; no franchise fees; no income taxes. Of course, only certain favored businesses qualify.
To our dismay, our own free-market governor, Rick Scott, has embraced corporate incentives. Scott maintains criteria that the “investment” must provide a certain level of return or the money must be repaid.
But he also has backed the Legislature’s allocating of $18.1 milllion to Enterprise Florida; $63.5 million to Visit Florida; and $19.5 million to Space Florida to attract and expand businesses and tourism.
Huey reported Sarasota County’s incentives have totaled $4.2 million, creating “nearly 1,700 jobs” and generating an economic multiplier valued at $500 million. Huey wrote: “An annual return on investment of more than 12,000%!”
Then there’s the silly and telling example of RND Automation and Engineering, now based in Manatee County and formerly in Sarasota County. Our sister newspaper, the Business Observer, reported last week RND in 2010 received $15,000 in performance-based incentives from Sarasota County to move from Manatee. Then, this past Jan. 8, Manatee offered $8,000 in performance-based incentives for RND in return for eight new jobs over five years. The CEO of RND, Sean Dotson, told the Business Observer the company’s move back to its original county had little to do with incentives. They “are nice, but we certainly weren’t counting on it,” he said. “We wanted to find the best building.”
The Founding Fathers envisioned competition between the states as a check on profligate governments, an incentive to maintain low taxes and favorable living and business climates. What they probably did not envision was the widespread use of tax subsidies. Although we should note that such debates were in existence even then.
Noted free-market French economist Frederic Bastiat wrote extensively on this subject in the 1840s. In his famous essay, “What Is Seen and What Is Not Seen,” he discussed whether the state should subsidize the arts. It’s apropos for economic incentives in general. Wrote Bastiat:
“One can ask where music would be in France without the Theatre-Italien and the Conservatory; dramatic art without the Theatre-Francais; painting and sculpture without our collections and our museums. One can go further and ask whether, without the centralization and consequently the subsidizing of the fine arts, there would have developed that exquisite taste which is the noble endowment of French labor and sends it products out over the whole world.
“… Would it not be the height of imprudence to renounce this moderate assessment on all the citizens, which, in the last analysis, is what has achieved for them their pre-eminence and their glory in the eyes of Europe?”
Likewise, in the context of $100 million of Florida taxpayers’ money going to businesses chosen by the state or $4.2 million of Sarasotans’ money, would it be imprudent to say that “moderate assessment” should be renounced? Bastiat answered:
“There is, first of all, a question of distributive justice. Do the rights of the legislator go so far as to allow him to dip into the wages of the artisan in order to supplement the profits of the artist? … I confess that I am one of those who thinks that the choice, the impulse, should come from below, not from above, from the citizens, not from the legislator; and the contrary doctrine seems to me to lead to the annihilation of liberty and of human dignity.”
In other words, what gives the governor, legislator or county commissioners the moral right to decide whether your money, your taxes, should be taken from you and given to ABC Corp.?
Bastiat uses the example of the French government subsidizing a theater with 60,000 francs. “But from where does that money come? What is the source of that 60,000 francs? And where would they have gone if a legislative vote had not first directed them to the rue de Rivoli? That is what is not seen,” he wrote.
“Surely, no one will dare maintain that the legislative vote has caused this sum to hatch out from the ballot box; that it is a pure addition to the national wealth.”
No, with all subsidies, Bastiat noted, “it is clear that the taxpayer who will have been taxed one franc will no longer have this franc at his disposal. It is clear that he will be deprived of a satisfaction to the tune of one franc, and that the worker, whoever he is, who would have procured this satisfaction for him, will be deprived of wages in the same amount.”
What Bastiat is pointing out is when government subsidizes a business, it is saying it is smarter than all of us and knows better than all of us how citizens’ money should be spent or invested. It is saying to us, with a degree of arrogance, that if Sarasota and Florida taxpayers are left to decide how to spend and invest their money, they would not be as good as the government at creating jobs and “creating a more sustainable future.”
We have always contended the most effective economic incentives are low taxes, low regulations and safe streets — a climate of freedom and free enterprise for individuals and businesses.
SMILE; IT’S ALL ABOUT THE MONEY
Smile. Click. Gotcha.
Florida law-enforcement officials can talk all they want about red-light cameras reducing accidents at stop lights. But consumers and taxpayers also know the cameras are all about the money.
From a recent report from The News Service of Florida:
“More than 100 jurisdictions across the state use traffic-light cameras that collectively have generated more than $100 million a year through tickets.”
What’s more, this report noted, the Florida Department of Transportation in June “directed local agencies to add at least 0.4 seconds to the yellow intervals on traffic lights. Research had found that yellow lights were set a half-second shorter than the recommended interval …”
In the city of Sarasota, by the way, collections from these $158 tickets were expected to more than double in the current fiscal year to $1.9 million.
A couple of Florida lawmakers are on to this rip-off. Rep. Frank Artiles of Miami and Sen. Jeff Brandes of St. Petersburg have filed bills to stop the installation of any new red-light cameras and reduce the ticket fines from $158 to $83.