Missouri shows us another corporate welfare flop | Arkansas Blog

Tuesday, January 3, 2017

Missouri shows us another corporate welfare flop

Posted By on Tue, Jan 3, 2017 at 9:20 AM

AP reports on the success of Missouri Gov. Jay Nixon's promise of up to $2 billion in state "incentives" — AKA corporate welfare payments — to build that state's economy. The record isn't complete, but in six years fewer than half the hoped-for 48,000 jobs have materialized.

Nixon responds that some major increases in auto plant employment wouldn't have happened without the giveaways.

There've been some embarrassments — default on bonds issued for a promised Chinese manufacturing facility that didn't happen. No, not a pulp mill.

This passage could be applied to any state in the country, including Arkansas, which has also had a difficult time over the years statistically supporting the notion that incentives have paid for themselves.

Missouri's experience highlights the extent to which states are willing to use targeted tax breaks to attract jobs, and the difficulty in determining whether the incentivized promises ultimately pan out.

"When firms apply for incentives, they tend to propose more jobs than are actually created," said Dagney Faulk, research director at the Center for Business and Economic Research at Ball State University in Indiana.
Academic research over the years has said time and again that corporate welfare is not the critical ingredient in industrial development (nor tax policy either). Raw materials, location, infrastructure, education, qualify workforce and even quality of life all add up to much more important factors.

And how do governors respond? By giving still more tax dollars away. Arkansas has upped the amount it will lend companies, backed by general revenue, and has even plowed tax money (in the form of money pumped into the teacher retirement system) to take an equity position in private business.

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