GUEST COMMENTARY: How states reduce prosperity while trying to create jobs

Wednesday, September 21, 2011 | 2:50 p.m. CDT; updated 4:17 p.m. CDT, Wednesday, September 21, 2011

An Open Letter to the Missouri General Assembly:

Mr. or Madam Legislator,

Your job creation efforts will create no net new jobs. Your efforts only redirect, redistribute and relocate jobs. 

Your incentives, your tax credits, your loans, your grants and your investments merely seduce investors to redirect their capital, to take capital from other uses, investments and job creation endeavors, and relocate it to your idea of its highest and best use.

State government produces no net new prosperity; it merely reallocates it and relocates it. 

And in the process of its reallocation and relocation, it takes a bite out of wealth to cover its cost of operations, which reduces prosperity for all. 

Every product or service that is purchased is made more costly by government initiatives such as those being considered in the state's current special legislative session. Built into the cost of every product or service are both the taxes to underwrite the cost of government to administer such programs and the taxes to underwrite the incentive initiative costs. 

These costs, like other business overhead, must be recovered in the ultimate sales price.

An economic development department is overhead that adds a burden to all products and services, private or public.  

More government results in higher cost of government overhead. Less government results in less overhead. That means either more taxes or less, costlier products or cheaper ones. 

Unlike free market enterprises that must work to keep overhead in check to remain competitive in price and retain market share, the government has only other states to keep its overhead costs in check. 

If other states have overhead that is less burdensome, businesses will migrate there with their capital and their jobs.

Missouri currently ranks 44th of 50 states in the government size sector on the Pacific Research Institute’s U.S. Index of Economic Freedom. It ranks No. 36 in the index sector of regulations and low in terms of entrepreneurial activity by the Kauffman Foundation

I submit that most entrepreneurs and existing businesses do not make the choice of where to start or relocate a business based on state-sponsored incentives.

Your best competitive edge in the race with other states is a business environment of low overhead and reduced regulation, not bumping up incentives and the size and cost of state government.

Bruce R. Hillis lives in Mexico, Mo.

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Paul Allaire September 21, 2011 | 7:30 p.m.

The collective effect of tax incentives is to transfer the burden of sustaining the costs of government from those most able to pay to everyone else.

(Report Comment)
Steve Spellman September 22, 2011 | 9:59 p.m.

Bruce is on the money with his letter here. So many fall for the Eco Devo alchemy schemes. By timing of Mamtek debacle has woken others up, and just in time to put the brakes on this rush-rush special session.

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