I know a way Kentucky can add about a billion dollars to its busted budget every year. And it won’t cost taxpayers a dime. In fact, it will honor the investment we make through the hard-earned taxes we already pay.
The money would come from ending the tax incentives, refunds, rebates and subsidies showered on businesses each year.
There is little proof that the huge sums we spend on these giveaways work. Two major studies have basically come to this conclusion.
Between 2001 and 2010, Kentucky gave $1.3 billion to 577 companies for the creation of 55,173 jobs, according to a 2012 study by the Anderson Economic Group. That’s about $23,385 per job. Worse, a number of these jobs were never created or not sustained, according to the study.
So much for the strangling chokehold of government regulation.
The University of Kentucky’s Center for Business and Economic Research also did a study in 2007 on the effectiveness of tax incentives.
“Why bother?” was the answer I got from a leading UK economics department head. “End them all” was the response from a second economist, one of the nation’s top policy and finance academicians. And for good reason: The study concluded that it could not determine that incentives affected a firm’s location decision.
Our “Kentucky is open for business” system is like a runaway money-train whisking vital government revenue over the cliff of fiscal responsibility. Every single one of these dollars is needed for education, social services, pensions, health care and infrastructure — not to help private enterprises increase their profits.
You’d think Gov. Matt Bevin might try to slow it down.
While campaigning last year at the Louisville Forum he said: “ I’m insulted by the idea we take your tax dollars to incent someone to move into your backyard, and to compete against you, when we don’t give the very same break to you as a small business owner. We need to be smarter stewards of the taxpayers’ money in government.”
But the first thing he did was make across-the-board cuts to education and services. Not even a widow’s mite was taken from the tax incentives he railed against on the campaign trail.
To be sure, the first round of incentives to land Toyota were essential. But part of the justification was that it would bring ancillary businesses which would add jobs and pay taxes. It was never intended to give every company a tax incentive. One tragic result is the untenable $18 million giveaway to the Ark Park — an unconstitutional support of religion, no matter how you cut it.
And is that fair to businesses that have been here for generations, creating jobs, paying taxes and helping to build the foundation of our community?
True, these tax breaks go to real companies with real jobs for real employees. But these jobs would exist regardless of the incentives. After all, businesses must invest in order to survive. They did so for hundreds of years without taxpayer help until the trickle-down, pour-up philosophy of the Reagan revolution.
As Jason Bailey, executive director of the Kentucky Center for Economic Policy, said, “Hundreds of millions of dollars are needed for education, roads and bridges and pensions. But instead of investing in those things, we’re promising future tax dollars to businesses for decisions many of them would have made anyway.”
Yes, we do compete with other states for some of these jobs. But we must not join them in this race to the bottom. We need to stop running scared and take a stand. What successful companies really want is a thriving, educated, healthy populace, along with strong social services and public infrastructure.
Instead of sucking us dry, businesses should aid our cause by paying their fair share. This is the unity that builds goodwill, good government and good fortunes for the many — not just for the few.
Richard Dawahare is a Lexington attorney.