Joseph Steelman
Let’s call it what it is: a handout, a freebie, a bailout.

By rejecting automotive bailout funds in 2008 and 2009, Ford managed to shield itself from the political hit that was sure to result. As an article in the Columbia Missourian points out, now Missouri politicians are looking to find room in the budget for a $15 million per annum tax incentive program to provide the Claycomo Ford Plant with income tax breaks to reinvest in the plant. This time, the remuneration coming under the guise of tax incentives. As Show-Me Institute scholars have pointed out in the past, when the tax burden is reduced for one targeted business or industry, but overall government spending does not simultaneously decrease, the marginal tax rate for other taxpayers necessarily increases. In this way, Ford would be the beneficiary of taxpayer money.

This illustrates another flaw of the tax credit system, adding to an already long list of inadequacies. Public disapproval of the auto industry bailout in December of 2008 was well documented. This disapproval most likely stemmed from the general public’s disdain of using taxpayer funds to shore up profits for big business. The tax credit system does much the same, except that politicians and recipients of the tax incentives have figured out how to have their cake and eat it too. Missouri’s tax credit system effectively funnels money to a business or group of the government’s choosing while at the same time serving as a buffer to shield the politicians involved from losing political capital.

I understand the importance of keeping jobs at home in a competitive nationwide market, but empowering the government to play favorites through the use of tax credits and incentives is not the most effective way to accomplish this goal (if it's a successful strategy at all). There are many other potential solutions that would not only help the Ford Claycomo plant stay afloat, but would also help in attracting other businesses to the state. Earlier this year, Show-Me Institute policy analyst David Stokes suggested that lowering the large commercial property tax surcharge in Clay County would help Missouri businesses located in that county retain more of their profits for reinvestment. Policies like this allow all businesses in an area to benefit, spurring reinvestment, stimulating growth, and widening the tax base. By improving the economic climate in general, benefits accrue to far more than just those lucky few businesses that government officials deem worthy.

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Joseph Steelman