Opinion: I agree with Ocasio-Cortez on something — tax subsidies for select corporations are wrong

By Rachel Greszler | The Daily Signal

Amazon announced its decision on Tuesday that it will split its second headquarters—“HQ2”—between the Crystal City section of Arlington County, Virginia, and New York City.

For more than a year, cities across the country had been competing to earn Amazon’s business, offering special deals, such as hundreds of millions of dollars in tax breaks.

Rep.-elect Alexandria Ocasio-Cortez, D-N.Y., was right when she tweeted that the idea that Amazon would receive millions of dollars in targeted tax subsidies “is extremely concerning to residents here.”

I would add that it’s concerning to all Americans.

America is the land of freedom and opportunity for all, not favoritism for the few.

When governments carve out special deals for corporations, they grant big business an unfair advantage, and that hurts the little guy.

It makes sense that states want to attract highly profitable companies. They bring jobs and productivity that generate all sorts of benefits, such as lower unemployment, higher incomes, and a larger tax base.

But special-interest tax breaks are not the way to do it.

When governments try to target profitable businesses with special subsidies, it can mean higher taxes on small businesses and workers to cover the gap.

A better policy than targeted subsidies that reward already profitable companies is an economic environment that encourages all companies—big and small—to set up shop in their jurisdiction and to thrive there.

A level playing field with minimal government interference and low, broad-based taxes is not only the fair way to go, it’s the most constructive for long-run economic growth and sustainability.

Sure, corporations will gladly take millions of dollars in initial subsidies, but what they really want—and what they ultimately factor into their strategic decisions—is a favorable business climate, including minimal regulations, a capable workforce, and low-rate and stable taxes.

Creating that type of climate is what Ocasio-Cortez needs to consider when she said, “We need to dig deep,” when thinking about bringing jobs to the community.

That’s where Ocasio-Cortez gets it wrong, however.

She asks, “Has the company promised to hire in the existing community? What’s the quality of jobs + how many are promised? Are these jobs low wage or high wage? Are there benefits? Can people collectively bargain?”

But in doing so, Ocasio-Cortez implies that governments can and should pick and choose who they want to come to their community.

Far from the egalitarian proclamations of democratic socialism, that’s as elitist a policy as it comes.

What about small businesses that only employ five people or companies that struggle to meet payroll and can’t provide high wages and deluxe benefits? Is there no room for them in New York’s 14th Congressional District?

Amazon didn’t start out as a multi-hundred billion-dollar company employing more than a half-million workers. States that want to foster growth and innovation similar to Amazon’s shouldn’t put up barriers to entry, but instead create open doors to all sizes and types of businesses.

In today’s increasingly mobile, competitive, and global economy, trying to attract profitable businesses through special tax subsidies will almost certainly prove futile in the long run.

Imposing elitist criteria on businesses would be even more damaging.

When it comes to providing jobs and good incomes, it’s not that difficult. A level playing field with low, broad-based taxes and few barriers to entry will prove to be a winning strategy every time.

Image courtesy of Wikimedia Commons/Tony Webster
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3 thoughts on “Opinion: I agree with Ocasio-Cortez on something — tax subsidies for select corporations are wrong

  1. We have the same problem here in Tennessee. Local or state officials will give away the farm in tax subsidies to attract businesses. I am not sure if they ever recoup the give aways.

    • Government cronyism is bad no matter who the recipient of the subsidy.

      If a business is worth it, citizens have every right to invest their own money. But from Amazon, to sports stadiums, to Vermont’s VEDA, VEGI, TIF and other tax funded incentives subsidizing large and small businesses, government legislators and administrators should not be trusted as fiduciaries because they don’t assume the inherent risks private investors assume when they invest their own money and, therefore, government cronies are less inclined to make reasonable judgements. In fact, government officials typically use their authority to bribe potential constituents to support their re-elections and reappointments. The only difference between the Amazon issue and Vermont’s small business subsidies is scale.

      Caution: Alexandria Ocasio-Cortez’s solution to cronyism is to eviscerate private property rights, nationalize businesses, impose wage and price controls, increase taxes and politicize the judiciary. After all, if everyone is subsidized (i.e. controlled), problem solved.

      Perhaps Ocasio-Cortez’s is right. Consider Venezuela, Nicaragua, El Salvador and Honduras. If the United States goes the way of most socialistic countries, the current caravan in Mexico will either reverse direction or pass through to Canada… like a kidney stone.

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