Cutting Corporate Welfare

Texas Comptroller Susan Combs has it exactly right: “The Texas economy will grow, with or without incentives.” The ‘incentives,’ of course, are government giveaway programs that cost taxpayers a lot without providing much return. It’s time for them to go.

They never should have been passed in the first place, frankly. Corporate welfare isn’t an appropriate way to build an economy. (We’ve opposed them all from the beginning.)

In the introduction to a report issued yesterday, the comptroller writes, “Only a small part of Texas’ annual economic growth can be directly attributed to incentives.”

The best economic incentives are low taxes, a reasonable tort environment, and minimal regulations. Texas’ economy will grow only if we continue to pursue THOSE forms of economic development. High-tax, bad-tort, crazy-regulation states flounder and fall, no matter how lucrative their subsidy and incentive programs might appear.

And that’s not some obscure economic theory — that’s what the real-world data is showing. People are voting with their feet, according to the latest census numbers, by moving themselves and their businesses to entrepreneur-friendly states.

Big-government, big-tax states continue to be the big population losers. Texas has been the big winner, attracting job-seekers, entrepreneurs and big-business alike thanks to a pro-growth economic structure.

In her report, “An Analysis of Texas Economic Development Incentives 2010,” the Office of the Comptroller analyzed the state’s various corporate welfare, er, incentive programs and found they lacked sufficient transparency.

We’re constantly told to accept these subsidy programs because they bring in jobs. But at what cost?

A report issued last week by Combs’ office similarly found a lack of job creation coming from school district tax abatement projects. According to the Associated Press, Combs said the abatement program was “used to over-incentivize projects that create few or no jobs.”

Indeed, the latest study shows school district “incentive” programs offered the worst returns. But that’s “worst” among really bad.

For example, the Texas Enterprise Fund spent a dizzying $7,587 of the taxpayers’ dollars for every job created/retained, the school district program cost a whopping $306,086.

(The “retain a job” myth is a separate post.)

The “Moving Image Industry” subsidy (tax breaks for films) cost $12,762 per job.

As lawmakers’ look to balance the budget without raising taxes, cutting corporate welfare and giveaway programs is a good place to start.

I appreciate that businesses want to flee California, New York and elsewhere. Texas is wide open! But those businesses need to also understand that the same thinking that drives incentives and other tax gimmes is what has in part led to the collapse of those bankrupt states. Any business or “industry” that demands taxpayer subsidies or handouts to locate here probably isn’t something we want in Texas, anyway.

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Michael Quinn Sullivan

Michael is the CEO of Empower Texans. A graduate of Texas A&M, former newspaper reporter, one-time Capitol Hill staffer, think tank vice president, and an Eagle Scout, Sullivan is married with three children. He divides his time between the Metroplex, the rest of Texas, and Austin.

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