Columbia: The (Subsidized) Silicon Valley of the Midwest?
From an article in the Columbia Daily Tribune:
To bring a potential 120 new jobs to Columbia, the state has presented 3M with a $4.27 million package of incentives. Most of that will come in the form of tax credits; about $1 million is grant money.
My intention is not to fault individuals and companies for taking advantage of the resources that are available to them. Instead, I argue that taxpayer monies should be put toward the best uses, and I have difficulty believing that concentrating the benefits on the favored few and diffusing the costs on the rest is an optimal strategy.
Considering only the amount expended via tax credits, the state government is spending $27,250 per job (plus dead-weight loss). When the grant money is included, the state is spending $35,583.33 per job. Is this level of subsidy the best use of taxpayer monies, particularly at a time when the state government has decided to make cuts to other services, like education and public safety?
Subsidizing select businesses and industries is an admission by the state government that the cost of doing business is too high in Missouri. As an unfortunate consequence, the businesses and individuals that remain in the tax base are left to pick up the tab, which makes it even harder for them to compete. Instead of distorting the playing field with generous incentive packages, the state government should focus on providing a favorable business climate for all individuals, businesses, and industries, not just a select few.
Given its long history of layoffs in the Columbia region, how can government officials be certain that this company will actually deliver on the 120 jobs that it promised? Companies in other states have failed to deliver on the jobs promised in exchange for receiving taxpayer monies, and it is likely that the same may happen in Missouri.
But assuming that those jobs pay an average salary they will generate enough state income tax revenue to pay for the credits and grant within just a few years. You’re right that the costs are diffused and initial benefits are concentrated, but a few years down the line there are diffused benefits as well when the entire state gets a return on its investment in higher tax receipts. For your argument to work, you have to prove that those 120 jobs would have been created anyway and have multiplier effects that are at least as large — and I’m not saying that you can’t.
Or do you accept that there could be an ROI but that it is wrong to gamble with public money when budgets are tight? Or that more should be done to ensure that the incentivized party follows through on their promise?
Otherwise, hear hear to creating a level playing field and favorable business climate.
Comment by Rob — October 22, 2010 @ 6:38 a.m.