Here is my full column that ran in the Washington County Daily News yesterday.
As each day passes, the deal that Gov. Scott Walker struck with Foxconn to incent them to build a massive facility in Wisconsin continues to look better. Foxconn has already expanded its original commitment to Wisconsin to include additional facilities in Milwaukee, Eau Claire and Green Bay. Now that the Foxconn deal has set a benchmark, some lawmakers, including Walker, are seeking to give Kimberly- Clark a similar package to keep a plant, and more than 600 jobs, in Wisconsin. The Legislature should reject such a deal, but they should set some broad criteria for when they would consider doling out taxpayer incentives.
Conservatives philosophically reject corporate welfare of any kind for many reasons. Using the coercive power of government to tax citizens for the purpose of handing it to other citizens is vexing. Furthermore, government intervention anywhere in a market distorts that market and makes it less efficient. Politicians spending other people’s money have the least vested interest in any business decision and are prone to making poor decisions. And there is always the risk of graft and corruption when politicians are making arbitrary decisions about which businesses will receive a handout.
There are many factors that go into a business decision about where to locate new businesses. Most of those factors have little to do with government. Access to natural resources, a labor force, proximity to customers and suppliers, etc., weigh heavily on those decisions. Also considered are the broad government policy aspects of a given location like tax rates, quality infrastructure, regulatory requirements, etc.
Wisconsin already has a legendary workforce and abundant natural resources.
In an ideal world, the state’s tax and regulatory burden would be so reasonable that businesses that could locate here would be fools for not doing so. Unfortunately, despite great improvement under Republican leadership, the weight of government in Wisconsin still makes it a more expensive place to live and do business than most other states. Absent a drastic reduction in the size and expense of government, Wisconsin state government must seek ways to level the playing field with other states and incent businesses to move here.
The taxpayers are not a bottomless well of money and state lawmakers need to be good stewards of the taxpayers’ money under their care. If Wisconsin’s politicians are going to use the taxpayers’ money to incent businesses to grow in the state, they need to adhere to some general principles to guide them. Business decisions are naturally complex. Every decision must be weighed with the facts presented, but there must be some general philosophy underlying the decisions.
First, the result of any incentive package should be a net economic gain for the state. For example, the projected economic impact of Foxconn measures in the tens of billions of dollars for an incentive plan costing a fraction of that. For Kimberly-Clark, the proposed plan is to maintain a business that already exists.
Second, any incentive package must include specific, measurable benchmarks for the business receiving the incentives and hold them accountable to those benchmarks. This requires interested, diligent work on the part of the overseeing state agency and the Legislature for years after the politicians who granted the incentives are out of office. If businesses know they can promise the moon without any accountability, it undermines the effectiveness and integrity of any deal.
Third, the incentives must be structured in a sensible way for the taxpayers. For example, an incentive package that forgoes future tax revenue that would not be realized anyway without the business meeting its commitments is far preferable to an immediate expenditure of existing money.
Fourth, Wisconsin’s politicians should not try to use taxpayer-financed incentives to fight larger economic trends. Our economy is constantly changing with entire industries being created and collapsing. Using incentives to attract growing industries to Wisconsin is preferable to using them to prop up dying industries.
Finally, tax incentives should only be used as a last resort and not to put icing on a decision that is already made for other reasons. If a business is already going to locate or expand in Wisconsin because of other reasons, then Wisconsin’s politicians should not waste taxpayer money on incentives just because the business asked for them.
Perhaps there will come a day when Wisconsin’s tax and regulatory burdens are so sensible that businesses will flock here like they do to some other states. Until then, the judicious use of taxpayer money for incentives will be a reality we cannot avoid if we are going to compete in the global economy.