Say Anything Blog

The Grand Forks Herald’s Tu-Uyen Tran has an excellent post about Aurora Medical Park’s campaign to get some economic development money out of the city of Grand Forks.  The Aurora people are arguing that their new hospital will bring in new jobs and more tax revenue.  Tu-Uyen counters that any new development - be it a new Target or a new furniture store or a new set of condominiums - would expand the tax base (and thus tax revenues) so why should the Aurora people be subsidized?

From the conclusion of his post:

It’s possible to argue that keeping people from taking their money to other cities is almost as good as bringing in new dollars. But, as I’ve mentioned before, that necessarily broadens the list of businesses that qualifies for economic development tax incentives.

Exactly right.  And once we agree that the list of businesses who qualify for subsidy should be expanded, where do those subsidies end?  The absurd argument would be that we should subsidize all business, but that’s counterproductive as you’d reach a point where you’d be taking so much money away from the citizens in taxes that they’d have little left over to spend at these businesses.

Which is why the government shouldn’t be in the economic development business in the first place.  It’s counterproductive, as I’ve already pointed out, and it tends to give politicians way too much power over the new businesses that open up.  It’s a process that’s heavily prone to corruption and cronyism, and if you don’t believe me look at Minot’s problems with economic development.  Our town’s Magic Fund has had all sorts of problems, most of them stemming from our politicians making poor choices about who to give subsidies too.

To be blunt, the best way to spur economic development isn’t to spend tax dollars on it but rather to give tax dollars back to the citizens to spend at the businesses they like to patronize.  More money in the pockets of citizens means more economic activity, which in turn means more development.  There are special cases, of course, when certain types of tax-funded economic incentives are appropriate.  The rebuilding time after the Grand Forks flood is certainly one of them, but ultimately it’s best to just work to keep the burden of government on citizens and businesses as light as possible.