Recently, I criticized the Alachua County Board of County Commissioners’ decision to give public funds, $140,000, directly to a private business, Optym, so that they would stay in our county. I then heard from many constituents on the theory that tax incentives used in this way create a Return on Investment to the county taxpayer and so I wanted to address that issue.
There is little question that most politicians love tax incentives; they get their smiling picture in front of a shining glass building talking about how they saved and or created jobs. Certainly, the businesses connected enough to attract incentives enjoy them as well, what sensible CEO would turn down free money? These handouts are sold to us under the idea of the Return on Investment (ROI), the promise that spending your money now will mean more money for the community at some future date. However, the problems with tax incentives are many.
First, there is little evidence that they work. The W.E. Upjohn Institute for Employment Research and the Institute on Taxation and Economic Policy have both released recent research demonstrating the weak link between tax incentive expenditures and economic growth. At the end of the day, the proposed investment ends up being at best a wash for the community.
Secondly, tax incentives are inherently unfair. These policies reward some businesses, largely businesses that can afford to lobby for their themselves or that can bind together into industry groups. Small businesses, the primary driver of employment and the local economy, are lost because they cannot afford to have a voice. Government should not be in the role of picking winners and losers, it should treat all its citizens and all their legal economic activities equally.
Annual budgets are a zero sum game; every dollar spent on tax incentives with the promise of future rewards is a dollar not spent on current priorities with immediate reward. A tax incentive rewards one business, but improving the infrastructure of the county rewards many. Perhaps when every other actual responsibility of government has been fully funded and completed there could be a case for tax incentives, but even not then.
Because these tax incentives are paid with our money. The person best able to decide how to spend your money is you. The return on investment for letting our friends and neighbors keep their dollars and spend them where they want will be more of a boon to our economy than a council of five people deciding who should get what. It is and should always be our choice.
I am absolutely the pro-business, pro-growth candidate. But I’m also the principled candidate who will work hard to create a level playing field for all businesses in Alachua County.
For more information on this topic, please see:
Institute on Taxation and Economic Policy | Tax Incentives: Costly for States, Drag on the Nation
Slate | Corporate Incentives Cost US $45 Billion in 2015, Don’t Really Work
CityLab | Handing Out Tax Breaks to Businesses Is Worse Than Useless