A story in Sunday’s Coeur d’Alene Press extolled the virtues of corporate welfare, as if there couldn’t possibly be anything wrong with a program that gives tax breaks to some at the expense of others. In case there is any doubt, there certainly is.
Idaho lawmakers and Gov. Butch Otter approved the corporate welfare scheme in 2014, and of naturally, many companies have applied for and received what’s called the Tax Reinvestment Incentive (TRI). That’s what counts as “success”—numerous applications from businesses for TRI. Here are some constructive criticisms of the TRI—items unmentioned in the Press article:
Applications for a tax credit is not an indicator of success. If it were, one could consider Idaho’s “grocery tax credit” a roaring success. But as with the grocery tax credit, people use it because it is there, not because it is great. It lowers a person’s tax liability. Idaho isn’t somehow incentivizing people to buy groceries, and the TRI is not incentivizing job creation, either.
The TRI is proof that Idaho’s taxes are so high that the state requires a special tax break in order to lure businesses here. Without TRI, Idaho’s confiscatory 7.4 percent marginal tax rate would be too rich for the tastes of companies looking to relocate.
As a result of TRI, Idaho’s tax landscape is a mess. Under TRI, some companies get a 30 percent tax break, while others get 10 percent and others get nothing. The state Department of Commerce swears there’s a method to the madness, but it’s mostly madness.
For companies that aren’t large enough to secure a special TRI tax break, they’re helping subsidize businesses that are; the TRI costs the state general fund money every year, making tax breaks for the rest of us that much harder to get, much to the detriment of small entrepreneurs.
Because the TRI reduces the cost of doing business for the lucky company that wins the tax break, those companies can pay employees more or offer products at less cost, further challenging the business model and the expenses of competing enterprises.
Nothing stops a TRI-winning company from moving out of state once the incentive is gone. And there’s plenty of evidence that this exactly what happens numerous times.
Idaho and other states have already had disastrous experiences with corporate welfare and state-driven economies. The Coeur d’Alene Press article missed a great opportunity to outline realistic criticisms of the program instead of merely parroting back what the state Department of Commerce would like you to believe about it.
Pictured: Jeff Sayer, Department of Commerce director
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