Americanly Yours

Promoting Free Markets, Free Trade, and Freedom!

State Tax Incentives A Bad Business

July 10, 2009 By: Phred Category: Uncategorized

I wrote the following article which has since been published in newspapers through the State:


State Tax Incentives a Bad Business

By Phred Barnet

Giving a tax incentive to a business to encourage economic development sounds like a great idea, but it is not. Tax breaks for businesses are little more than corporate welfare at the expense of hard-working Georgians. They amount to subsidies favoring a select few businesses over Georgia’s residents and existing businesses.

Proponents of tax breaks for new businesses argue the increase in jobs will make up for the reduction in revenue, but tax breaks for businesses rarely pay for themselves and often end up costing the state a great deal of money. That shortfall must be paid for by Georgia’s taxpaying citizens and business, which don’t have the benefit of that break.

Giving a business a tax incentive to move here may help that business in the short term, but in the long term the people who pay for that tax break also happen to be the employees and the customers of that company. Plus, it sends the wrong message to existing Georgia businesses: “If you stay in the state, we will use your tax dollars to subsidize your competitors.”

In June, after the North Carolina Legislature approved a $46 million tax break designed to induce Apple, Inc. to build data warehouses in the Tar Heel State, Scott Hodge, president of the Washington, D.C.-based Tax Foundation, had this response: “Too many legislators confuse targeted business incentives with policies that truly create a better business climate.”

“They are not. They only provide an excuse for lawmakers to avoid real tax reform. Targeted incentives are to a state’s economy what steroids are to the human body – short-term results that eventually weaken the bones, cause heart failure, or worse, impotency. Tax systems should not be used to pick winners and losers or micromanage the economy. Data farms in North Carolina might be a good thing, but it is much better for the marketplace to decide that, not government. The key to a prosperous economy is a tax system that provides a level playing field for all businesses and all industries.”

In Georgia, a new law gives the entertainment industry tax credits for up to 30 percent of production and post-production expenditures. Proponents argue that if Georgia does not do so, it will lose out to other states. This mentality leads to bidding wars that end up offering more and more incentives to the entertainment industry.

Former North Carolina Supreme Court Justice Bob Orr recently complained that “the industry has been able to play off North Carolina against South Carolina against Louisiana against Georgia. Louisiana raises its incentives, and it puts pressure on South Carolina, North Carolina and other states to do likewise.” In fact, only weeks after losing the new Miley Cyrus film to Georgia, North Carolina’s State Senate moved to increase their tax breaks for entertainers from 15 percent to 25 percent.

The chief economist for Louisiana’s legislative fiscal office, Greg Albrecht, estimates that in 2006, Louisiana gave the entertainment industry about $121 million in tax credits, but that only around 18 percent of that money was ever recovered in economic activity and taxes. He denounced the programs as “an expensive way to create jobs,” maintaining that “there’s no way you can say this makes money for the public.”

At best, these incentives can create temporary increases in economic activity. Yet these temporary increases do not pay for the costs of the programs themselves. There is no logic in Georgia subsidizing the enormous salaries of Hollywood actors, directors and producers while many of our own residents struggle to get by in this tough economy.

The most equitable tax incentive that Georgia could offer would be to cut taxes on individuals as well as corporations to make Georgia more attractive to individuals and businesses – both old and new. This would lead to investment and job creation, encourage more businesses to move to Georgia and send the correct message to Georgia’s current businesses.

Americanly Yours,

Phred Barnet

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Secession In Georgia?

April 30, 2009 By: Phred Category: Uncategorized

Here is a story that you most likely missed.  There wasnt a single mention of it in the media (any media outlets) until two weeks after it happened.

Earlier this month, the Georgia State Senate voted 43-1 in favor of a bill that would have had major consequences if it had also been passed by the State House.

The bill mentioned the 9th and 10th Amendments frequently and explained they many ways in which the Federal government has ignored those Amendments and userped State power.

But this wasnt just your typical States Rights resoultion.  The second section of the bill reads in part:

“BE IT FURTHER RESOLVED that any Act by the Congress of the United States, Executive Order of the President of the United States of America or Judicial Order by the Judicatories of the United States of America which assumes a power not delegated to the government of the United States of America by the Constitution for the United States of America and which serves to diminish the liberty of the any of the several States or their citizens shall constitute a nullification of the Constitution for the United States of America by the government of the United States of America.”

Yeah.  This bill wasnt just “affirming States Rights.”  It wasnt just threatening secession.  It was asserting that any act perceived to be an unconstitutional intrusion on the rights of States or citizens would constitute a dissolving on the Union.

It then listed several offenses as examples of what could trigger the dissolution of the Nation, including:

IV. Surrendering any power delegated or not delegated to any corporation or foreign government.

VI. Further infringements on the right to keep and bear arms including prohibitions of type or quantity of arms or ammunition

Ill remind you that this resolution passed by a vote of 43-1.

Number IV is already being violated by the continued existence of the Federal Reserve which is a private corporation.  In other words, the passage of this bill into law would have meant that the State would be giving itself the legal right to secede–or more accurately to declare that the United States government no longer existed.  Of course, no President including Mr. Obama would ever agree that an act such as limiting the number of guns one could own would trigger the death of the Union.  And of course, it is unclear whether or not Georgia would actually follow through with their threat to secede.

This seems to be an idea which is gaining more steam in the South.  This was 2 weeks before Texas Governor Perry brought up secession at a Tea Party.  I am in the process of conducting an interview with a Republican candidate for Governor of Texas in 2010 named Larry Kilgore who is running as a secessionist.  He ran in the primary last year for Senator and won about 225,000 voted and 18.5% of the vote against a Republican incumbant.  A recent poll showed that 48% of Texas Republicans  and about 15% of Texas Democrats favor secession.  This could be an interesting race to keep an eye on.

Here in Georgia, however, I have hardly heard a word about it.  Certainly not a word from any prominant State officials.  I had no idea that the State Senate was so overwhelmingly in favor of secession.  My guess is that many of those who voted in favor of the bill, entitled “Affirming states’ rights based on Jeffersonian principles; and for other purposes” did not read the bill.  This is why you read the bill before voting on it.  Bills often have titles that dont fully explain what they are about.  The title of this bill made no reference to secession of dissolving the Union.  This bill really wasnt that long.  You can find it here.

These certainly are interesting times we live in…

Americanly Yours,

Phred Barnet

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