Thanks Virginia Young. The political reporter for the St. Louis Post-Dispatch did a little bit of legwork and discovered that the state’s various tax incentives to lure business aren’t coming close to providing the number of jobs promised. In a well-researched piece, she noted that since 2005, the state’s Quality Jobs Program produced 2,273 new jobs . That’s far less than the 22,000 claimed by the state.
Of course, this result isn’t news to us. Tax incentive programs like Quality Jobs (where tax credits are given for the promise of new jobs created) are doomed to failure because they’re based on a false premise: that state government can pick winners in an economic development program. In fact, it’s virtually impossible to do. Just ask investment bankers, angel investors, venture capitalists and anyone who owns shares of a stock. The losers are abundant.
Indeed, programs like Quality Jobs could end up costing jobs. We’re going to steal from research by Joseph Haslag, an economics professor at University of Missouri-Columbia, and executive vice president of the Show-Me Institute, a free market think tank. In a commentary for the institute last year, Haslag writes: “One little mistake, such as picking the second-best instead of the best plant, can also affect the state economy for years to come.”
Haslag’s solution is simple: reduce taxes for all. The state’s goal should be little victories, with business hiring one employee here, two employees there. Sure, it doesn’t generate the big headlines that come when huge tax breaks are given to big projects. But as Young showed, those big victories are rare. In 2008, the state redeemed about $500 million in tax credits. That’s way too high a price tag for the minor gains.
Tomorrow, we’ll tell you what all this means for Gov. Jay Nixon’s economic stimulus plan.
