New at Reason

Julian Sanchez | January 12, 2006

Dan McGraw explains why tailoring special tax deals to attract businesses is a mook's game.

Reason needs your support. Please donate today!

Try Reason's award-winning print edition today! Your first issue is FREE if you are not completely satisfied.

← Trace That Gun | Main | "Philosophy of Design" Course in California… →

See all 11 comments | Leave a comment

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment or disable your ability to comment for any reason at any time.

|1.12.06 @ 10:20AM|#

This is great. Local governmnets do everything but buy hookers to try to get these big companies to come to town. Once the companies are there, governments pass laws to control every detail of their business operations, thus forcing the companies out of town. In Maryland right now, they are passing a bill that would require large employers to spend 8 percent of payroll on healthcare for their employees. The way the bill is written, it only applies to Wal Mart, which I'm sure received tax incentives to do business here in the first place.
I'm sure glad none of this costs taxpayers any money.

|1.12.06 @ 10:40AM|#

Essential companion reading: The new Rules Project provides a wealth of info to document the shaky promises and hidden costs of big box retail debvelopment---http://www.newrules.org/retail/econimpact.html

Dave W.|1.12.06 @ 10:58AM|#

In Maryland right now, they are passing a bill that would require large employers to spend 8 percent of payroll on healthcare for their employees. The way the bill is written, it only applies to Wal Mart, which I'm sure received tax incentives to do business here in the first place.

If WalMart can negotiate its tax rates into the future, then it should be able to negotiate its freedom from regulation into the future as well. Live and learn, WalMart.

|1.12.06 @ 11:06AM|#

McGraw should have remained focused on the principled libertarian argument that tax receipts should under no (or at least massively restricted) circumstances benefit private enterprise.

When he begins to question Cabela's store placement and marketing strategy as additional justification (not to mention the implication that this area is "saturated" with stores) it weakens his argument:

1) It's freaking Texas...I'm betting both overall demand for outdoor outlets and the profit margin per client transaction is very lucrative. Because there is a competitor 10 miles down the road is precisely why you'd want your store there.

2) Regardless of #1, I'm positive that Cabela's knows more about where to place its new locations than Dan McGraw does.

|1.12.06 @ 11:12AM|#

Dave,

There is very little that prevents government officials from changing the terms of the deal after the store is built.

This may be found in everything from the blatantly unconstitutional campaign finance reform laws down to the oft-broken promise to not pull poeple over for seat-belt violations.

Making deals with government officials is a very bad idea. The courts and the so-called separation of powers is merely a speed-bump rather than an obstacle to them violating their agreements.

R C Dean|1.12.06 @ 11:52AM|#

Local governmnets do everything but buy hookers to try to get these big companies to come to town.

I'm pretty sure the pitch to get companies to relocate to Dallas includes hookers. Given the number of "men's clubs" and "massage parlors" this Bible Belt burg has, I'd be shocked if it didn't.

|1.12.06 @ 3:14PM|#

" �The notion that a hunting store would draw all these tourists is ridiculous,� says Greg LeRoy. "

As a retail real estate developer, I've got to contradict Mr. LeRoy. Cabelas and Bass Pro pull visitors and customers for miles and miles and miles. Whatever you think about their getting a tax break to locate within a particular municipality, fact is that these guys attract more men than Elle McPherson

|1.12.06 @ 3:55PM|#

As part of a strategy to work with local land- and businessowners to invest in their properties and businesses, TIFs can be a good thing. But when they're used simply to attract outside businesses, it's a sucker's game.

Economic development investments, to be worthwhile and sustainable, need to change the underlying conditions in an area so it become more attractive to do business in that area, not simply to boost the profits of a company operating in a location that isn't attractive to do business. That's not development; it's just welfare.

And with the proliferation of these into every suburban industrial park and commercial corridor, it's simply become an arms race. Each community has to offer them to attract businesses, or suffer a major competetive disadvantage.

|1.12.06 @ 4:34PM|#

I have to agree with joe on this 100%.

The article mentions the south suburban area of Chicago, where I was raised (or lowered), mostly bedroom communities supporting the steel mills from decades past. Anyway, there is such an abundance of valueless land in the eastern portions (lots of supply, demand close to nil) that TIF's don't do much good other than discourage the use of vacant buildings because the amount of undeveloped property is high. Almost all TIF-related development there takes place on undeveloped land, and if the business fails it's just another white elephant unless further subsidies encourage re-use of the building. It's like they're trying to help the construction trades by encouraging the building of another unneeded building, ala WPA projects. Lots of affordable housing though.

|1.12.06 @ 5:11PM|#

to echo joe & russ, this "arms race" is further encouraged by the companies who when in politically fragmented areas, will essentially city-shop (aka blackmail) for the best freebies.