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Home | Blog | A Portrait of Local 'Pro-Business' Politics

A Portrait of Local 'Pro-Business' Politics


As I noted in this Mises Daily article from 2012:

[C]hambers of commerce across America, and other lobbying arms of the so-called business community are in the business of lobbying ceaselessly for more government spending, for more subsidies, and for more state power in the name of "business-friendly" policies that often amount to little more than subsidy programs.
At the local level as well, chambers have become major advocates of tax increases and more government spending.

In other words, business leaders have little interest in actually protecting private property. Here's recent news coming out of Ellisville, Missouri:

For years, city officials have been planning to lure Wal-Mart to Ellisville, about a half-hour away from St. Louis. Their most recent plan involved building a 150,000-square-foot Supercenter, which would have cost $50 million. A private developer could have received up to $15 million in tax incentives. Even more outrageously, Ellisville could have also authorized eminent domain to acquire property.
But in October, after intense pressure from both grassroots activists and a new mayor, Wal-Mart announced it had “decided not to proceed” with the Ellisville store.

In an earlier story, it was reported that Ellisville's city council had approved tax incentives for the developer. Upon hearing that the taxpayers would foot the bill for a private developer, at least one local business "leader" was jubilant:

Tom DiCarlo, president of commercial real estate firm Pangean Properties, said the project would be a “shining example of what can be accomplished for Ellisville’s economic recovery.”

There are two parts to this controversy. The town planned to lure Wal-Mart to town by providing tax incentives, and the city council also planned to steal land and hand it over to private developers to sweeten the deal. Clearly, the more insidious part of this deal is the eminent domain part, which is nothing more than expropriation for the benefit of a favored special interest. I'm sensitive to the fact that that "tax incentives" could potentially be defined as "tax cuts," but it's worth noting that the advocates of such incentives rarely have any interest in opposing taxes. They simply view tax incentives as a policy tool for governments to choose winners and losers. In practice, the tax incentives are designed to benefit the favored firms while government spending and taxation continues unabated for everyone else. (The Boston Tea Party was a reaction to a "tax incentive" program for the East India Company.)

Anyone who supports tax incentives such as TIFs as a first step with the intent of having all taxpayers enjoy similar tax holidays might warrant being taken seriously as an advocate of freedom, but in reality, virtually all supporters of such tax incentives (such as chambers of commerce) really only want them to accomplish some mercantilist goal, which in this case involves robbing small property owners to benefit larger ones.

We can also note that the primary motivation for the new development is political. The new development is a chance for the local government to bring in millions in sales tax revenue through new retail outlets. Apartments, on the other hand, bring in little, if any, tax revenue for the town. So, the city has decided that the low-revenue apartments are out, and the high-revenue retail shops are in. The fact that the apartments provide low-cost housing for 100 households in a small town means nothing at all to the politicians who approved the initial deal. What matters is tax revenue, and the working-class residents at the condemned apartments can just drop dead. We need to ask ourselves why local governments so happily approve TIFs and similar tax incentives. It's fairly clear that governments do not views such incentives as tax cuts at all. They are, in fact, just a mechanism for increasing overall tax revenue.

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