Morton Marcus: Time for businesses to stop seeking subsidies
Thursday, January 05, 2017 10:08 AM
INDIANAPOLIS – One week ago, I promised recommendations for improving the state’s economy. In the past I’ve done that extensively, but somehow readers don’t remember. Here are some more thoughts to be forgotten.
It’s time for business leaders to stop seeking subsidies from the same public sector they deny adequate funding to do its job. Businesses complain of a shortage of qualified labor. Is it government’s responsibility to train the labor force? Are our elementary and secondary schools to be merely preliminary settings for vocational training?
What does business do directly to improve the labor force? If they find too many workers disabled by illiteracy, drugs and alcohol, a common complaint in this state, do they sponsor work-prep programs, including alcohol and drug treatment efforts? Do they increase wages to attract more qualified workers? Do they separately or collectively offer intensive training programs for workers? Many firms believe government or workers themselves should pay to prepare for work and for specific occupations. Most often firms don’t want to pay the taxes or fees necessary to support such education because workers are not bound by contract to repay the investment.
Where is business in economic development? Indiana uses a combination of federal, state, and local funds to attract and retain firms. The amount and use of private funding for such efforts is hidden from public view. One means of subsidizing businesses is through Tax Increment Financing (TIF) districts. These districts use the increased future property taxes paid in a developing area to repay bonds sold to raise funds for the sewers, streets, etc. needed in that area.
It’s still a valid idea; however, it often grows beyond its initial boundaries and intent, without providing necessary infrastructure and maintenance. TIF districts also delay the receipt of local revenues for ordinary, but growing, government functions (police, fire, schools, and libraries).
The biggest subsidies reduce or eliminate business taxes. Other subsidies reduce or refund taxes to firms that increase employment. Additional subsidies come from curtailing or weakening the enforcement of regulations. Indiana also subsidizes large-scale commercial and residential developments beyond city boundaries by impeding their annexation. Too often these developments escape paying taxes for essential city services.
These many subsidies create Indiana’s “good business environment,” but they may be hazardous to the public’s well-being. Economic developers and businesses tell legislators all these subsidies are needed to combat competition from other places. It’s time to prove it; give us evidence, not just uncorroborated stories and supposition.
Let business demonstrate that Indiana is “a state that works.” Let’s see the Indiana Chamber of Commerce and the dozens of trade associations haunting the Statehouse go back to their members and place responsibility for business success where it belongs, on business leadership.
Indiana could be a leader. Announce we will no longer pay businesses to locate or expand here. If you need a subsidy to be here, maybe you don’t belong here.
Marcus is an economist.