QUOTE(Erasmussimo @ Aug 2 2005, 11:01 AM)
In general, the argument about subsidizing business to make jobs is a crock. Business can't function without employees; they have to hire somebody. The only thing that local tax breaks do is steal jobs from one area and transfer them to another area. There's no net gain for society.
This depends on how you define 'society'. It must be kept in mind that there's nothing that says that said business needs to stay in our
society at all, so if they can get a subsidy from somewhere else that enables them to be more competetive, then they're going to do it, and those jobs indeed are lost. From the microperspective, local government is going to define society as its locale, so again if that business locates somewhere else, then also those jobs were lost to that society. Which, of course, is why local governments do offer these breaks in the first place, and the local community that benefits from it (and also pays for the tax break) doesn't complain about it, since there was indeed a net gain for that community.
Subsidies in the form of tax breaks simply distort the marketplace. The government intervention results in greater economic activity in one market sector, and necessarily less economic activity in a sector that the market thinks is more important. The net result is always a net reduction in overall economic output.
Not necessarily, although I'm certainly all for taking government out of the equation. Government can incent businesses in certain areas that then spur other business, creating an overall net gain in business, employement, taxes...win, win, win. Further, consider that the same applies whenever government gets involved in anything...it creates a distortion in the marketplace and a net reduction in overall economic output. So, this is really an argument for a minimalist federal goverment strategy, which I would have to agree wholeheartedly with.
What doesn't make sense is distorting the economy for the benefit of a small group.
Again, this depends on who is supplying the incentive. Frequently, the tax incentives are provided by the location where the business is going. For that area, the entire economy will usually benefit, creating a net gain for everyone.
(Well, I suppose it makes perfect political sense if you're a Congresscritter and you get campaign contributions from the party that gains -- but I'm talking about what's best for the people as a whole.)
Now, for those instances where this is pure pork being applied by said Congresscritter, then I am in agreement. I'll dig the pit, you fire up the coals, and we can have a good pig roast.
The moral here is simple: you can't mess with Mother Marketplace. You try to twist her around, and all you accomplish is a net loss.
Preaching to the choir! Yes, I am in full agreement. These decisions are almost always made for political benefit, not economic...the economic 'benefits' usually cited completely ignore the costs you have stated. The sad thing is that the very people (consumers) who end up paying for this remain ignorant to the fact that they're bearing the cost. Also, I would add that, in the end, the subsidies remove the incentive to become competetive, so the jobs eventually end up lost anyway. So, consumers end up paying for nothing (unless you consider the votes gained by the supposedly sympathic Congresscritter).
In short, then, it seems like we probably need to separate 'pork' from local business tax incentives. I think a good economic argument can be made for the latter, whereas the sole purpose for the former is generally buying votes or political favor. So, think of that as involuntary campaign contributions....not sure most people would be in favor of that at all.