Heartland Institute analysis

The Heartland Institute, a Chicago think-tank, recently published an analysis which neatly summarized the problems that come with state development organizations and the tax breaks and incentves they offer. I highly recommend reading the analysis. Here are my favorite insights from the article:

1) "Many of the corporations state development officers have declared to be winners of tax incentives have turned out to be losers in the market place." When it comes to making investement decisions, always trust the market over the government.

2) Discussion of "a number of fundamental reasons why these development programs often fall short," including opportunity costs and rent-seeking.

3) The cited example of rent-seeking: The John Locke Foundation in North Carolina "obtained a 2004 PowerPoint presentation by Ernst & Young consultants titled, 'Turn Your State Government Relations Department from a Money Pit into a Cash Cow.' The presentation detailed how private-sector businesses could effectively obtain and retain tax incentives from government." I always have and still do refuse to blame corporations for accepting tax breaks that are offered to them. Major corporations are not dumb; they will try to cut costs, including their tax burden, as much as possible. But are you aware of any small business that has a State Government Relations Department?

All in all, an excellent piece from the Heartland Institute. It's good to know that others are aware of the problem.