Earlier this year states bordering Illinois were “gleeful” at proposed tax hikes intended to close the “Land of Lincoln” state’s huge budget shortfalls. The glee was based on predictions that the tax hikes would drive businesses out of Illinois and into bordering states.
It turns out that the glee was well justified, as Illinois now tries desperately to bribe businesses to stay in the state with huge economic development packages.
But this begs the question: Wouldn’t it be easier to keep these companies in the state, and even attract new businesses and thus jobs and economic activity, by just lowering taxes? Or at least keeping them lower in the first place?
Raising taxes and then turning around and trying to bribe these businesses into staying in the state seems like the height of lunacy. Not to mention a recipe for graft and corruption. After all, who gets to decide which businesses get an extra special incentives package to stay in the state and which don’t?
The moral of this story is that the best “economic development” policies any given state or community could have is lower taxes and limited government.