May 10, 2013 10:37:17 AM
Imagine a new neighbor moves in from Illinois with his wife and two children.
Being friendly, you invite the family over for burgers one Saturday night. After a while, you pose a simple question: What brought you to Mississippi?
"Well, it was a tough call," your new neighbor responds, "but the Mississippi Development Authority has this great new program that allows anybody moving to Mississippi to be excused from paying any property taxes or car tags for 20 years. Plus they paid my moving costs and financed my house."
What would your reaction to this be? I suspect quite a few people would be upset. Why should this newcomer not have to pay taxes while you do? Why should your money go to pay for roads, sewers and schools that your neighbor will be using for free?
Now you know how Tupelo's Cooper Tire and Rubber Company feels. Cooper Tire is the 11th largest tire manufacturer in the world with a 14 percent market share in the United States. It recently expanded its plant in Tupelo.
But this month the Mississippi Development Authority (MDA) decided to award $300 million in subsidies to Japanese competitor Yokohama Tire. Yokohama has $6.2 billion in sales compared to $3.3 billion for Cooper Tire.
I'd imagine the managers of Cooper Tire are none too happy about this slap in the face.
In fact, I can see the scenario right now: Cooper Tire approaches MDA and says they'll close the Tupelo plant unless they get the same deal Yokohama got.
No doubt, the governor would convene a secret, emergency session of the state Legislature and cave, starting yet another vicious cycle of corporate giveaways.
Big companies are getting quite good at playing one state off another, bidding up the incentives until Mississippi ends up paying $100,000 or so per job.
Of course, the extent of the subsidies are never really known because most of the contracts are state secrets. You can thank the Mississippi Supreme Court for ruling that Nissan didn't have to disclose its negotiated utility rates because it was a private company.
When a private company receives a special deal that comes out of the public coffers, it waives its right to privacy. These deals should be public, not secret.
Don't expect to see a cost-benefit analysis other than something scratched out on the back of an envelope. I've filed open records requests for these over the years. I did more analysis when I refinanced my house. Everything hinges on the vague "multiplier" effect. Garbage in. Garbage out.
The public cries for jobs so politicians don't think they can afford to vote down these sweetheart deals for fear of being seen as anti-jobs. This is democracy at its worst.
True statesmen resist caving in to such political whims and do what's best for our state - fair taxes equally applied to everyone. This is crony capitalism, not free enterprise.
The state of Mississippi wants to encourage business growth? Great. Eliminate the corporate tax across the board like Texas has done.
Invariably, these special deals go to huge manufacturing plants. This results in a subsidy to large-scale production. In fact, it is the smaller, nimbler, high-tech manufacturing shops that are the wave of the future. This is government planning at its worst.
The free market works. Government planning does not. Every single country that has embraced government planning has failed. Every single country that has embraced free enterprise, equitable taxes and fairness for all has thrived.
So here we are in Republican Mississippi embracing the very worst of government planning.
Here's the cold hard truth: Politicians like handing out special favors. It makes them powerful. They can benefit from this power. It sows the seed of corruption.
But everybody's doing it! I hear this refrain constantly from my teenagers. I expect better reasoning from our state leaders.
These big industrial announcements are treated with great hoopla. Mississippi "won" the bid!
In Europe they take the second best bid. They figure the lowest bid is screwed up. Rightly so. Nobody doled out more than us.
No doubt, it's tough to unilaterally disarm in the economic development war. The best solution would be for the federal courts to rule that tax favoritism violates equal protection under the law, which is guaranteed by our Constitution. This could happen.
Or the free market could offer its own solution. As Margaret Thatcher said, "The problem with socialism is that eventually you run out of other people's money."