PROVIDENCE, RI — “Good tax policy usually translates into good economic development policy”…
Tax policy should be evaluated on its adequacy and a perception of fairness. He emphasizes it has to be perceived as fair. Hmm… Rationale: We have voluntary tax compliance in this country. If people don’t think it’s fair, they won’t send the money in.
At least one study has showed that personal income tax is a bigger impediment to growth than the corporate income tax.
Many studies have shown government-created economic incentives don’t correlate with business/economic growth. Whatever states believes this should go first in peeling back their incentives (Of course, certain players in RI might take this challenge more seriously than Mr. Eads realizes)…
This is interesting: Economic business incentive programs have been challenged in court in Ohio. The circuit court rejected the “incentive” on constitutional grounds, but SCOTUS overturned the case on procedural grounds. Still an open question?
He suggests that targeting productivity might be the most effective way to use incentives.
It is a mistake to set your tax plan, without setting your policy and economic goals first. It needs to be done the other way around.
On the general philosophy of implementing a targeted incentives program, Mr. Eads quotes Reagan: “trust but verify”.