Recently I wrote about the Mississippi Beef Plant (The Mississippi Beef Plant Has a Lesson For Us) and its spectacular costs to the taxpayers of Mississippi. I wondered if there were less spectacular failures that we didn’t know about because they weren’t reported in the news media. Failures in this context could mean a situation where the taxpayers have to make good on a bond or debt that the benefiting company didn’t pay, or it could mean a situation where the company doesn’t default, but fails to deliver on the promised economic development activity.
In an article in the June 15, 2005 Wichita Eagle titled Stalled Firms Keep Tax Breaks we learn of two failures of the second type. The two companies in question, The Coleman Company and McCormick-Armstrong, failed to deliver on their promises to add jobs in exchange for property tax abatements. Coleman, in fact, employs 114 fewer people than at the time the bonds were issued.
Why do governments grant companies tax abatements? It’s simple. When companies pay less tax, they have the opportunity to invest more. Tax abatements are tacit recognition that the cost of government is onerous and serves to decrease private economic activity and investment.
Shouldn’t we lower taxes for everyone, instead of only for the chosen few companies that are in a position to receive political favors from local governments?