It’s hard to open a major newspaper without reading about another Texas city cutting a special deal with a private corporation. This happens so regularly that it almost seems normal for government to throw public money at well-connected private interests. But it isn’t. The proliferation of economic development incentives in Texas begs the question: Do our city governments serve all of the people, or just some of them?
Many such examples of corporate welfare involve Texas municipalities competing against one another. In early October, San Antonio and Bexar County gave away more than $2 million worth of incentives to the company that operates Valero convenience stores. The reason? The business was considering moving its operations from Northwest San Antonio to Schertz, a small city just outside San Antonio.
Good luck finding existing small-business owners in San Antonio, or any other large Texas city, who are getting similar breaks. Instead, they pay the taxes that fund the crony deals that officeholders give their favored corporate suitors.
And really, that’s the crux of the problem. In our cities, you’ll find family-owned small businesses that have been quietly chugging along for years. They’re not asking for handouts, and they’re sure not getting any. And doubtless, for many of them, it’s getting harder and harder to survive in our fast-moving modern economy.
Why should government make things harder by tilting the playing field to favor the well-connected through the picking of winners and losers? In this way, Texas’ local economic development policies represent a transfer of wealth from most of the businesses that aren’t given special treatment to the few that are.
Economic development advocates will tout that they’re helping everyone by “creating jobs” and “growing the tax base.” They’ll show you shiny presentation-grade folders full of specious figures and charts that boast of all the jobs they’ve supposedly created with their corporate welfare. Really, they will. Just ask.
For all their supposed expertise in creating jobs, though, the economic developers don’t have much of a track record successfully using their corporate handouts. A new Texas Public Policy Foundation study titled “The Failure of Tax Abatements” points to a wealth of academic research and practical experience that have borne out the abysmal record of tax abatements, one of the most commonly used economic development incentives, to even do what they’re intended to do. Alternatively, it recommends policy solutions that actually will grow the economy and benefit everyone, not just the favored few.
Government doesn’t create jobs. It can only take from some and give to others, or create certain market conditions through taxation and regulation. If local officials so choose, they can enact policies, such as having reasonable taxes and regulations, that benefit all businesses by allowing entrepreneurs to create jobs and invest. Heck, it’s worked for Texas. A low tax and regulatory burden has made the Texas economy the envy of the nation.
This route is clearly the one cities should take, and not only because it works. If we are to have a government of, by and for all people, we must enact policies consistent with that ideal.
Corporate welfare, such as tax abatements, simply isn’t.
Fields is senior policy analyst for the Center for Local Governance at the Texas Public Policy Foundation; email@example.com.