Tax Cuts for All

Over the course of the past few years, politicians – mostly Democrats – have taken to their soapbox to trumpet the retention or relocation of some company in New Jersey. Each time, their chests puff out at the number of jobs created or saved. And, each and every time, the company involved received a massive tax subsidy.

Come now more Democrats, led by Senator Sarlo, urging an entirely new package of subsidies and tax credits for a selected industry, this time "digital media". For producing e-content here in NJ, companies would receive a tax credit.

In the old days, the Democrats had an expression for such programs: corporate welfare. Apparently, that old chestnut only applies to business subsidies ladled out by Republicans. When Democrats propose them, they’re benign efforts to stay in the forefront of the "new economy".

The Japanese tried this gimmick: choosing selected industries and heavily subsidizing them, with government selecting winners and losers. It produced the "Japan, Inc." buzz for a few years -- until the entire economy collapsed. Among the lessons hopefully learned from that fiasco: industrial policy never works, as government is essentially incompetent to pick winners and losers.

Alas, the lessons the Democrats learned, though, is that public relations trumps results every time. There have been a few high profile successes, with large companies, offered sufficient bribes, agreeing to remain here. Assuming the instant program actually works, and some companies locate here for the subsidy, all other things being equal, someone else will pay higher taxes so that these preferred companies pay less.

Put another way, one of Jim McGreevey’s first official acts was to double the corporate business tax, asserting that business must pay its "fair share" of NJ’s obscene budget. (When a Democrat employs that phrase, it translates to "more"; that is, whatever tax you're presently paying, your "fair share" is always "more") Naturally, businesses retrenched; but for the expansion in governmental hiring, there has been essentially zero net job growth over the course of the past seven years.

Obviously, much of the blame for this economic malaise rests at the feet of the spendocrats in Trenton, who've never met the tax they considered too high. Now, having reaped the inevitable results of imposing ever higher taxes on NJ businesses, they dole out subsidies to a lucky few. A clearer example of Ronald Reagan’s old chestnut would be hard to imagine: the Democrats, having taxed and regulated business until it stopped moving, now propose to subsidize it.

Here’s a thought: instead of imposing massive tax increases upon business generally, then carving out high profile exceptions for favored industries, why not just repeal the foolish tax increases entirely? Instead of government attempting to pick certain industries for subsidies, treat all businesses equally and let the market determine which should succeed, and where, and which should fail. A low tax, business friendly environment will do more to attract – and keep – jobs than targeted subsidies.

These proposals may "work" -- in the sense of providing an opportunity for the Governor to hold a press conference bragging about the few firms and the few dozen jobs they produce. But they will not reinvigorate NJ’s economy. That task requires that the state reverse its well-deserved reputation as a profoundly anti-business tax-hell, and could start by cutting taxes back to their pre-McGreevey levels.

These various subsidy programs demonstrate, conclusively, that tax cuts work. So, instead of showering goodies on favored industries, then crowing about how those tax cuts "work" – while the rest of the economy withers – cut taxes, across the board, for ALL businesses. While this produces few opportunities to stand behind a podium in front of a particular business to grandstand, the beneficiaries will be the tens of thousands of folks who kept or got jobs because NJ is no longer (justifiably) viewed as a lousy place to grow a business. After all, from the state's perspective, what difference does it make if a person opens an E-commerce business or a bank? There exists no logical reason to tax the latter to subsidize the former.