Tuesday, June 12, 2007

Should there be a federal law against state incentives?

Last week, Jeff Pruitt proposed in a comment posted to this blog that there should be a federal law prohibiting cities and states from offering subsidies and special tax breaks to companies for the purpose of getting them to move from one state to another. Not to brag, but I had the same idea back in 2005.

Such a law would keep corporations from playing state governments against each other. You all know how the game works. MegaMundo Incorporated announces that they are building a factory that will employ 500 skilled workers. But they claim that they are trying to decide between 2 different possible locations. Let the bidding begin!!! City A offers 100K in incentives, and City B offers 150k. But MegaMundo decides to go to City A because its close to an major interstate highway. They cash City A's check. The reality is that they were planning to go with City A all along.

Next year is a presidential election year. So write to your favorite presidential and congressional candidates. Let's see if we can get this adopted as part of a platform.

4 comments:

B.G. ((Semper Paratus)) said...

While I'm solidly IN favor of stopping these "bidding wars" as a carrot on a string for some business to drool over, I would entertain the notion of having the city of FORT WAYNE provide me and my family for some INCENTIVE to STAY here....

Now that would be fun to watch!

;)

B.G.

Robert Enders said...

The only city to successfully prevent "brain drain" was East Berlin. But those measures worked right up until 1989....

If a person doesn't want to stay in Fort Wayne, if they do not want to be part of this community's future, then I do not see a reason to bribe them or force them to stay.

Tim Zank said...

Wouldn't the Libertarian solution be to elect officials in the states that wouldn't give away your tax dollars to lure companies? What would, or should the feds have to do with any of it? I don't think you want the federal government regulating what your state leaders can and can't do with state resources do you?

Robert Enders said...

Tim,
The Constitution does give the Federal government the power to regulate interstate trade. That power has been severely abused, such as when the federal government decided that possessing a gun within 500 feet of a school interfered with interstate trade. The founder's original intent with the interstate trade clause was to keep say, Indiana from placing tariffs on coal imported from Virginia, or Ohio from outlawing grain imported from Indiana. This kept trade wars from taking place between the states. A state might gain a temporary economic edge by restricting imports, but other states would soon respond with their own restrictions. In the end, everybody loses.

Part of the whole reason for having a federal government in the first place was so that states would place nice with each other and not interfere in the (mostly) free interstate market. I can vote for a governor and state reps who promise not to use my money to subsidize companies. But in order to keep Buckeyes from trying to bribe companies into moving into their high tax, low speed limit state, I have to turn to Congress for help.