Tax rollback is key to competition
On July 24, a public hearing took place before City Council as part of the state-mandated process for action on my proposal to exempt new business equipment from taxation. The legislation would put all businesses on a level playing field with GM, which received super-abatement (no taxes for 10 years) on its $1 billion investment in new equipment.
About a dozen people came to speak out against the proposal. Half were government units (the city, school districts, library, airport, Citilink, etc.) and the remainder were mostly representatives of various business lobbies, particularly the professional “economic developers” who peddle tax abatements for fees.
Two key points arose from the testimony:
1. The government units could not manage the loss of revenue.
2. Competition among the surrounding counties is bad.
The first point suffers from a cognitive failure. An examination of the tax data reveals that governmental units would likely lose little revenue if the plan were adopted. It also reveals a general lack of understanding of the current system in which they operate. First, not all $57 million of revenue from the equipment tax would be “lost.” Because of the way tax levies work, the diminishment would be about $37 million a year after full phase-in, which would likely take 10 to 15 years as the old stock of business equipment is retired.
Currently, more than $37 million of tax incentives countywide are already reducing revenue to governmental units such as schools, libraries and the like. This portfolio of incentives phases out on a predetermined schedule based on the type of abatement or tax increment financing deal that was extended by the government to certain businesses. The majority of these incentives expire over the next 15 years. As this revenue comes on line it offsets, nearly dollar for dollar, the “lost” revenue of the retiring business personal property.
The second point is just preposterous – and dangerous.
The local economic development professionals, one after another as if collectively rehearsed, said that my proposal would hurt the regionalism they have been working so hard to promote. Good! They said my proposal would create competition among counties. Fantastic! They said my proposal would give Allen County an unfair advantage. Wonderful!
The current controlled environment where economic development groups and local governments milk businesses collaboratively to manufacture barriers to entry and obstacles to investment in exchange for political power and project financing is doing damage to our community.
Competition makes everyone better. If creating the most competitive business environment in the state is what I’m being accused of, then please find me guilty. Free markets and private property rights are the cornerstones of economic growth and prosperity. I’m all for it.