Tuesday, May 28, 2013

Tax incentives and economic development......

Is it circular and perpetual or merely a beclowned merry-go-round?  Asks Bill Heasley, who is clearly exasperated by communities and states dangling carrots of incentives in front of prospective employers, as he  pens this interesting essay.  As someone who pays attention to such things I feel his pain, but fear he has missed a much larger point.  Although in danger of being totally swamped by the behemoth in Washington, Federalism still exists in the good old U. S. of A.  The fifty states are different.  The fifty states have different approaches to fund raising, regulations, and taxation.  Fifty experiments in governance if you will.  Major industrial employers, those to whom the dangled carrots are being offered, typically make huge capital investments when investing in a new facility.  It is only prudent of them to shop among the various fifty states to find the best strategic fit for their company.  States, who find that their existing fund raising, regulatory, and taxation techniques have put them at a competitive disadvantage in attracting and/or retaining such employers, begin to game their own system, thus creating the "beclowned merry-go-round."  I suspect Heasley would call this gaming a "vicious circle."  I'd call it a "virtuous cycle."   Said competition between states and communities works to keep the heavy hand of government lighter, and perhaps smarter.  It reminds those politicos, who think they are in charge, that the risk takers and employers (employees too) can, and do, vote with their feet.  Never a bad thing.  Just saying.


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