MY VIEW: Bust the incentives addiction

 

MY VIEW: Bust the incentives addiction

 

Date: July 15, 2010
by: Rod Thomson

 
 

There are cycles, there are vicious cycles and then there are local government incentives to attract businesses.

To any given single community without leadership grounded in sound principles, it all sounds like a fine idea. We want to lure companies that provide clean high-paying jobs, and so we offer tax breaks and maybe land incentives. Every other community begins offering those, too, so we up the ante to include direct cash grants, which are matched by other communities, so we increase the size of the packages.

But now climb above and notice that communities all over Florida are doing this to attract many of the same companies, competing with each other to give away the most local tax dollars to companies that often are already located in a community. Then go further up and see that every state, and thousands of communities, are all doing the same thing.

And the net gain from all this frenetic activity? Zero.

No, actually, the true net is a significant loss from fewer taxes collected and more spent.

This cycle of giveaways plays itself out in every facet of the private sector, except often times for the existing businesses — also known as beasts of burden — that are left off the merry-go-round. Take Richard’s Whole Foods, an existing, longtime tax-paying Sarasota chain that watched the city shell out millions to lure competitor Whole Foods downtown — when Whole Foods already had said it wanted to be in Sarasota.

The highest profile examples are professional sports teams. The owners of football, basketball and baseball teams have perfected the art of playing local yahoos — way out of their league so to speak — against each other. We just watched that with spring training, where the Cincinnati Reds got Goodyear, Ariz., to spend millions of tax dollars for a new stadium, which prompted Sarasota officials to offer to spend millions in tax dollars to try to attract the Boston Red Sox, which took a larger taxpayer payout of millions from Lee County, leaving us pitching in millions in tax dollars for the Baltimore Orioles.

Anybody else see a problem here?

It just keeps going on and on.

Most recently, we have the Economic Development Corp. of Sarasota County giving away more than $250,000 to urge hiring at Tervis Tumbler Co. and MyUS.com.

Tervis was already planning a new, 40,700-square-foot expansion with plans to add 80 jobs this year. It was given $100,000 from the EDC for plans to add 214 jobs over three years. That is $467 per job total. Obviously, Tervis does not add any jobs for that incentive.

Maybe worse is the MyUS.com gift of up to $165,000 for jobs it adds by moving from Manatee County to Sarasota County. The EDC takes credit for “attracting” the company to Sarasota, but all it did was move across the county line.

Both of these are well-run, profitable companies, and they cannot be blamed for taking what is foolishly given them. Neither would add one job without the market showing the need for it.

That taxpayer money is simply a gift from the political establishment. An utter waste.

You will hear politicians and EDC people say these incentives bring jobs and increase the taxbase. Some, yes. Many, no. But always remember this: Every subsidy includes a loser side. That is often existing businesses and individual taxpayers. All this cash comes from somewhere.

This is not a conservative-liberal, left-right, capitalist-socialist, libertarian-greenie issue. This is about some bad governance that is now rampant to the point of insanity.

So, what to do about it?

Here is a possibility: The Legislature could ban the use of public money to subsidize the location, re-location or expansion of private companies already within Florida. Best of all would be to eliminate the tax incentives altogether to lay the groundwork for challenging the concept nationally.

Because then, and here is the key, the next time a state tries to poach a Florida company, Florida can sue that state under the equal protection clause of the 14th Amendment. It seems obvious that everyone is not treated equally.

If the U.S. Supreme Court could locate a copy of the U.S. Constitution, it might be able to see that it has jurisdiction to rule on this under the Commerce Clause and just might find the whole thing unconstitutional under the 14th Amendment.

Yes, it sounds like a reach. But many ideas do at first, and then some of them change the world. This might not change the world, but it would certainly be a step toward better governance and stewardship of the public treasury.

Is there one legislator with enough knowledge of our founding principles to investigate this idea and introduce legislation next spring to eliminate public subsidies for private companies — at least for private companies within the state of Florida?

Rod Thomson is executive editor of the Gulf Coast Business Review. He can be reached at rthomson@review.net.
 

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