Diary

Liberal Republican, MI01, chooses Tax Incentives over the Free-Market

One of the ways that lawmakers in Michigan have been making names for themselves is by employing targeted tax incentives. The practice is both criticized and applauded, depending on if the critic or the one who praises benefits in any way.

The purpose of easing taxes on business to motivate them or encourage them to do business in Michigan seems like a noble thought, after all, Michigan’s unemployment rates are the highest in the country, and have been for 4 years now. But one cannot ignore the absolute fact that the only benefit these schemes have is to vault the name of the sponsor in congress, and create an advantage by the recipient against his peers.

According to Jack McHugh at the Mackinac Center for Public Policy, the most liberal agent of these targeted tax incentives is Senator Jason Allen.

Since 2001, Allen has introduced at least 60 bills in this category, many of them thinly disguised favors benefiting specific companies. In fact, these bills Allen introduced are clearly red flags, and once again highlight the fact that he is not conservative.

Spending a little bit of time perusing that list, the reader becomes very familiar with the words ‘certain,’ and ‘particular.’ This is the problem with the idea. Targeting certain and particular industries and businesses for tax loopholes creates an unlevel playing field, and does not create jobs.

Michael D. LaFaive of the Mackinac Center for Public Policy says it best, “While legislators and the governor chase particular firms with targeted tax breaks, thousands of potential new business start-ups are stillborn as a result of a punishing tax, regulatory and labor climate. These losses are the “unseen” cost of government trying to pick winners and losers, rather than doing the harder but more fruitful work of making Michigan a state that is attractive to all employers — not just those with clout in Lansing.” (emphasis mine)

An unfortunate embarrassment that goes along with government being so involved with business is that crooks and ne’er do wells will take advantage. In an article written by McHugh, Legislature’s Most Persistent Targeted-Incentives Booster to Run Hearings on Embezzler’s Tax-Break Deal these “incentives” are described by another Senator as corporate welfare.

The Cato Institute, a libertarian thinktank, disagrees that abating taxes is welfare, because that would suggest that keeping more of our own money is a somehow a “gift” from the government. However, they are clearly against targeted tax breaks as, “certainly bad policy. Because they provide special treatment for politically powerful industries, such tax breaks run counter to the notion that all taxpayers should be treated the same.
Furthermore, targeted tax breaks create distortions in the workings of the economy. Government steps in and creates an uneven playing field by granting tax breaks to particular industries.”

Targeting certain businesses that are politically well connected, (meaning they have greased the skids through campaign donation,) may increase the funds that a legislator collects for election, and will get his name in the headlines, but at what cost?

For every tax break given to Federal Mogul, their eventual closing and loss of jobs was the result. Yet upon the signing of these tax breaks, Senator Allen said, “I’m glad to see that the governor agrees with me and my Republican colleagues.”

For every tax break and subsidy created for the film industry, the actual result is less jobs, and less growth.

For every renaissance zone created, and self-aggrandized, arrogant, central-planning, sub-government authority imposed, very little if any jobs are created.

For every allotted authority granted to local government to increase taxes on certain services, those services suffer because they abuse the consumer.

Every business that wins with government in the short term, loses in the long run because the benefit is not real, and did not happen naturally.

Jason Allen has suggested that the free-market reforms of the Engler Administration were no longer effective in “today’s” economic climate.

Twenty-four months ago we were in an entirely different economy; and it is very obvious that the tools that were put together under the previous administration were probably adequate for that type of an economy, but with the stress that’s going forward with our manufacturing base; the changes going on in the economy with regards to technology, it’s very appropriate for us to take some time to sit down and review the activities of the organization and see what other areas we can be of assistance to promote jobs and create economic wealth in our state. (Emphasis added.)

Government does not, and cannot create wealth. This basic and obvious statement is part of why I have been consistently insisting that Jason Allen is not a conservative. He continues to call himself a conservative, even using the name Reagan in nearly every stump speech. No conservative accepts that free-market reform cannot work.

Jason Allen is on the wrong side of economic freedom, and his continuous suggestion that government can help by inflicting itself upon business, proves his true stripes. By not attacking the problem of bureaucracy, regulation and taxation that are the source of Michigan’s economic woes, he instead offers to take little bites here and there, and by doing so, picks who wins and who loses. That is the intention of course, but with this type of scheme, in the end, everyone loses.

Jason Allen is running for Congress in Michigan’s First District, against 5 other Republican candidates for Bart Stupak’s soon-to-be-vacated seat.  The Primary is August 3rd.  A true Conservative is running in that race, Dan Benishek, and is my pick for U.S. Congress.