Politicians love to swing for a home-run. We saw it recently here in Tennessee with the $197.6 million incentive package that helped to attract Nissan to move their headquarters from California to the Nashville suburb of Franklin. Now other large corporations are lining up to see if they can cut a deal with Tennessee.
But, does this type of corporate welfare work?
According a series run by the Lexington Herald-Leader such packages do not always deliver over the long-term.
Here are the highlights of the lessons they say have been learned in Kentucky:
- Companies that get incentives to create jobs commonly fail to meet their obligations.- A tax-incentive program that targets high-unemployment counties has had little effect in many of the neediest places.
- Government money used for corporate subsidies is sometimes loosely monitored and invested in projects of questionable value.
- three-fourths of the state's economic development funds are used to provide financial subsidies to businesses, leaving little money to train the state's work force and spur entrepreneurship.
Since most of our economic growth and new job creation are a result of entrepreneurial development, spending so much trying to attract corporations to move their operations may be misguided. If there are enough slack resources in state funding to offer rich incentive packages, let's cut tax rates instead and let the market generate jobs and growth, as lower taxes and less government spur entrepreneurial activity.
(Thanks to Ben Cunningham for passing the Kentucky story along).
