October 22, 2014
As originally published in the New Hampshire Union Leader
To help create jobs, politicians regular have to decide whether to do something or get out of the way. New Hampshire can do more by doing less and try to stay out of the way of people who know what they’re doing. We can’t compete with big states in an expensive and unfair bidding war to lure jobs to the state. Our best strategy is to create a climate in which job creators can flourish and avoid the managers looking for handouts and subsidies.
Regularly we read about some large auto company or other concern who gets states to bid millions of dollars in handouts of money and soon-to-be “forgiven” loans – money those politicians take from other taxpayers in their state in the hope of landing some high profile press release factory.
New Hampshire’s history is to avoid such politically driven games. We don’t enter bidding wars with money taken from other taxpayers to transfer to a chosen few.
The state’s long standing philosophy was summed up quite well by one of the government’s most senior economic development professionals. Michael Bergeron of the state’s Division of Economic Development talked to Sarah Palermo of the Concord Monitor about jobs that moved from Concord to Connecticut.
Connecticut had offered a million dollars of “loan forgiveness” (which sounds better than a cash handout which is what it really is) and New Hampshire had no similar program of cash handouts.
Bergeron said “a lot of companies will shop around to find the best deal. Some states will give away the bank. The law of physics says the money comes from somewhere, and it’s the taxpayers.”
This lesson is often forgotten when people think “the government should do more.” Any subsidies that we hand out to lure businesses to the state are paid for with dollars taken from other businesses – businesses already here and creating jobs, employment, revenue, and economic activity. In essence we would be taxing existing business to transfer their money to the relocating business. We would penalize a company for being here already and being a good corporate citizen.
Bergeron went on to summarize our less controlling philosophy: “instead of taking money away from you and giving some of it back some of the time, why don’t you keep it and use it as you see fit for your company.”
Without question, New Hampshire’s strategy makes us unable to compete for those companies that demand handouts before they ever expand. Yet, no one business development plan will attract 100% of all companies. We choose not to try and pursue those companies who demand greater and more expensive handouts. That allows us, however, to compete for those companies that have a philosophy more suited to our own.
Many companies are not interested in the gamesmanship of new programs. Instead they want a climate like the one Bergeron describes. They want a stable climate where government is not constantly picking winners and losers. They don’t want to compete to be this year’s favorite of the current crop of government planners. Instead they want to run a business in the way think makes most sense, the way that provides the greatest number of jobs and return on investment.
In Bergeron’s terms, they aren’t seeking to pay into a kitty and try and get the government to pick them as this week’s winner. They want to keep the money and use it as they see fit for their companies.
This is New Hampshire’s traditional philosophy. We compete on climate not unusual events.
Unfortunately, our climate needs some work. Our business taxes are the highest in the country. In an historical oddity that would have seemed impossible years ago, our Business Profits Tax is higher than even Massachusetts. That and a series of smaller taxes must become more competitive.
If we aren’t competing through government handouts – and we shouldn’t be – we have to do everything we can to create a very competitive environment not just kind of competitive.
Activist politicians often speak of “investing” in this program or that. But lowering our highest in the region tax rates is a better investment. We don’t rely on hoping that government planners have managed to see the right trends. We get out of the way and let entrepreneurs risk their own capital to fail and succeed.
Our government’s best action is to do less and get out of the way more.