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Thursday, January 15, 2009

Fiddling while Pennsylvania bleeds

Brian O'Neill has an outstanding column in the Post-Gazette questioning the efficacy of "economic development" subsidies (corporate welfare) during a state budget crunch - or any time, really.

The real gem is this:

"The governor believes that investing in programs that attract more development is always wise,'' Mr. Ardo said.

I thought the two multimillion-dollar stadia and the multimillion-dollar light-rail extension were supposed to be the catalysts. I guess that's always been the trouble with government catalysts. Ya gotta keep catalyzing 'em.
Exactly right: Pennsylvania has long been among the leaders in "economic development" spending, but among the laggards in economic growth.

1 comment:

Elizabeth A. Male said...

If they truly wish to catalyze growth, the legislature needs to ELIMINATE business/entity level taxation. Spending on "economic development" is nothing more than Keynesian quackery.

During testimony before the Joint Economic Committee on May 21, 2003 Alan Greenspan said:

"...First, Congressman, let me just repeat a cliche which happens to be true, mainly that capital doesn't pay any taxes; only people pay taxes. What happens is, you impose taxes on organizations which then deflect them elsewhere. But at the end of the day, all taxes are paid by people. I have always argued that this is a very inefficient way of organizing revenues within a government, and that we're far better to tax -- gain our taxes directly, rather than putting it on capital. Because all it does, it slows down the growth of economic activity and the revenue base from which the revenues actually occur. GREENSPAN: And I've argued over the years for the elimination, where we possibly could, of taxes on capital. And I, as you probably are aware, have always argued for the elimination of the capital gains tax. And the reason is is that I think it's an extraordinarily inefficient tax -- inefficient means of raising revenue in the sense that by posing itself on capital reduces the growth rate in the economy...."

To spur economic growth, we would be well advised to remove taxes on capital at the state and federal levels.