Although it feels as if genuine policy debates have receded into the background in Rhode Island, reviving them may help correct the corrosion spreading throughout our civic house.  Corporate tax incentives, for example, are an area in which conservatives and progressives in Rhode Island tend to agree on the binary “yes/no” question, raising the possibility not only of collaboration, but also of changed minds.  If we agree on the conclusion, perhaps interaction will give us the farther-reaching chance to be persuasive about our reasoning, which is where the difference comes in.

Put in context, the problem with government’s corporate incentives is not that private-sector greed corrupts the pure intent of government officials, but that they allow the corrupt impulses of all people to work around natural social forces while failing to accomplish their stated goals.  Rather than fix an unhealthy regulatory environment, for example, the relevant government offers to compensate its chosen businesses for the regulations’ cost while imposing new requirements that have nothing to do with the economic reality of the area (such as employment targets, products offered, and store hours).

John Mozena explains the problem succinctly, with examples, for the Iowans for Tax Relief Foundation:

The Hy-Vee saga demonstrates one of the biggest flaws with the way government-run “economic development” programs function in Iowa and across the country: Elected officials and bureaucrats always have big plans, but the marketplace often has different ideas. These taxpayer-funded subsidies are meant to cover over the gap and create incentive for businesses to locate in one place instead of another.

The problem is that subsidies have become so common — and are so valuable as a political tool for politicians wanting to claim they “created jobs” for their constituents — that not getting money from taxpayers is now far more unusual for a project of any meaningful size than receiving it. As expensive as they are, however, the real-world evidence is that these subsidies aren’t big enough to change companies’ decisions about where to go, what to build, and how many people to employ.

Mozena cites a study from Iowa academics finding that these incentives are a waste of money 90% of the time.

Unfortunately, they’re so darned attractive to government officials, at least as long as taxpayers are apathetic, bought-off, or confused by the tangle of issues on which they’re supposed to base their votes.  Officials get to pretend that they can use other people’s money to wish away economics and human nature.  Their urge to control gets another boost when they find themselves empowered to pick and choose the beneficiaries of that largesse, which they can dispense based on their own pretense to entrepreneurial insight, organizations’ alignment with their ideology, or the tendency of the company’s officials to put money in their campaign coffers.  And finally, rather than private sector businesses’ being a competing source of power and influence in the local community, they become dependent on government for subsidies.

In theory, in studies, and in common sense, corporate subsidies can be seen to be worse than useless.  After agreeing on that proposition, however, progressives and conservatives part ways, with the former seeing it as a reason for putting more resources under total government control.  Conservatives, in contrast, see it more like mold in the basement; you can clean it up and dress up the damaged areas, but the wiser course would be to understand it as a symptom that points to a deeper problem to resolve.

Featured image by Justin Katz using Dall-E 40.