New York

It's been way too long. Let's get back on track. . .

Over at DMI Blog, Adrianne Shropshire discusses the New York state legislature's efforts to enact tax break and economic development reform. Although lawmakers in the Empire State were unable to come together on proposed legislation, Ms. Shropshire notes that

the campaign, spearheaded by local organizations and coalitions around the state, revealed the simmering anger and disappointment directed at local IDAs [Industrial Development Agencies] across the state. From losing jobs to poverty wages to not being able answer questions about where the money went and what was the local benefit, the effectiveness of this economic strategy was called into question at every level. Let's call it the "we give away tax-payer dollars but we don't ask questions and have no expectations" strategy.

With law school just starting back up and the possibility of new readers, let's restate two of the main premises of this blog. First, lawmakers should not be in the business of deciding who and who does not get tax breaks and/or incentives. The current policy of offering these breaks as a means of development leads to benefits for only those with political access, i.e., large corporations. When large corporations are able to attain these breaks, it makes it that much more difficult for small businesses to compete.

Many people, such as Ms. Shropshire, have complained of this policy but have done so in a way that accuses corporations of stealing taxpayer money when they are granted these incentives. My second premise is that these types of arguments are misguided. If the idea behind tax breaks and incentives is to encourage economic development, then the belief that these incentives "give away tax-payer dollars" is incorrect. After all, prior to these incentives coming into place, there was no development to begin with and, therefore, no taxpayer dollars to give away. Ms. Shropshire's logic means that taxpayer revenue would exist without these incentives, which is not necessarily true.

The fundamental idea behind the two above premises is that the best way to encourage development is eliminate (or at least significantly scale-down) these highly bureaucratic and costly state development agencies and offer a low and uniform tax rate for small and large businesses alike.