A Tax Break Is Not "Spending"
We were greeted with this headline and article from the Lexington Herald Leader today:
Kentucky spent $1.29 billion on economic development incentives over last decade
Kentucky has spent $1.29 billion on economic development incentives over the last decade, mostly in the form of tax breaks to companies that pledged to create jobs, according to a new report shared Thursday at a legislative hearing.
We are not advocates of using tax breaks as economic incentive, preferring instead a competitive tax code that attracts employers and enabled entrepreneurs. Offering tax breaks to certain companies that meet certain conditions is allowing the government to pick winners and losers in the marketplace. Instead of letting the government chose which corporations pay $129 million less in taxes annually, Kentucky could simply cut the corporate income tax rate 36% and expect the same revenues.
But we digress from the point we wished to make, which is that, under no circumstances can keeping the money you earned and not providing it to the state be considered state spending!
The state is not "spending" by not taking your money from you.
The article has other half-analyzed ideas, like:
Kentucky is a tax-friendly state for businesses. The overall share of business profits taken as taxes in Kentucky is 18.2 percent, compared to 19.3 percent on average for the peer states.
We haven't seen this particular study, but we do know that Kentucky has a disproportionally progressive tax system and relatively high state and local income taxes, both of which place Kentucky at a competitive disadvantage when it comes to creating and attracting businesses.
The article conclude with Governor Beshear's Tax Hike Commission Specialist Jason Bailey begging for tax hikes:
Kentucky should throw less money at businesses and invest more in schools, vocational training, transportation and high-speed Internet access, said Jason Bailey, director of the Kentucky Center for Economic Policy in Berea.