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Please note very careful this question to the Missouri Senate Economic Development Committee by 9 year old Grace Hamby: "Why do you not understand that it is not fair to take money from one person and give it to another"
Theft is theft and it is a violation of the natural laws of human behavior. This particular law is reported in a section of the Holy Bible commonly called the ten commandments.
"Thou shalt not steal."
Exodus 20:15
The following is the excerpt from Paul's letter in response to inquiries quoted at top:
[begin Paul Hamby excerpt]
" Paul, this one doesn't make sense to me. Tax credits allow a company, even one from China, to absorb their start-up costs more effectively. Once they are established they grow both jobs and capital for the region... not sure why you are fighting this..."
"If they create more jobs and lower taxes for some businesses, won't that be good for Missouri?"
The answer is No! Economic intervention is not the proper role of government and this bill is probably unconstitutional. It will take more than a 30 second sound bite to explain the economics, so grab a cup of coffee and read on...
Tax credits & subsidies are government intervention in the economy. They have 2 possible outcomes;
Govt helps to establish a successful business by subsidies, tax breaks, infrastructure etc at the expense of other businesses. One business benefits while the others pay. If this were the game of Monopoly and say you wanted to build a new hotel on Boardwalk, you would force the other players to each pay for a portion of YOUR hotel. Go around the board with your hand out and ask each player for $500. They can't say no, because this is now the law. A real world example would be Wal*Mart comes to town. The local and state politicians give them thousands of dollars of incentives. Those tax subsidies are then paid for by the rest of the community including the businesses who compete with Wal*Mart. Some of those competing businesses will go out of business because the market is not big enough for the existing Mom and Pop store and Wal*Mart who has an unfair advantage with government help.
Govt helps to establish a business that fails. In this case everyone loses. New business start ups are risky. Entrepreneurs are risk takers. They are the best at determining if a potential business will succeed and generally they are gambling with their own money. Bureaucrats suck at determining risk. Bureaucrats should not be trying to plan what businesses will succeed. The failure of this economic theory has been proven many times, most notably in the collapse of Soviet Russian economy. Why do Missouri lawmakers think they can centrally plan our economy when so many others have failed before them?
It takes real leadership and faith to support a non interventionist economic policy. History is on our side however. Frédéric Bastiat wrote "But how is this legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime."
Our 9 year old daughter, Grace stated it even more simply "Why do you [senate economic development committee members] not understand that it is not fair to take money from one person and give it to another"
America became the world's most powerful economy during the 1800s because we did not have central planning. Early America had economic freedom - the ability to start new businesses without high taxes, expensive regulations and fear of government intervention.
Senator Jim Lembke spoke about economic freedom on the Missouri Senate floor Thursday morning.
"I believe, what we are doing is rearranging the deck chairs on the Titanic. How about if we step back and look at our tax policies that don't pick winners and losers. Small businesses in my District have never asked for a tax break! What policy can we step forth without having to subsidize business, end this now! We should come back in January and quit chasing after this bucket of gold at the end of the rainbow. Government doesn't know how markets work; Government is a poor central planner."
"By saying no to the China Hub, we can stand on the principle of liberty. Government must be about equal opportunity and should have a tax code that is level and just for all citizens." Senator Lembke spoke about some Missouri Senators feeling that they must do something; "I'll tell you what we won't do as a body, we are not going to rush through this process passing bad legislation that is not good for the taxpayers of the state, Mr President, this [senate] body will slow down the process and we will decide if this is good business for the taxpayers, if its good policy and if it's good to change the statutes of the state. If not, we go home without accomplishing anything but much better than passing bad legislation for taxpayers."
Equal opportunity
Competition
Fair playing field
Competition is the heart of a strong economy. Companies compete for your dollars. The companies that thrive in a free market are those that produce the best products at a fair price. When government intervenes, there is no longer a level fair playing field.
Every government intervention comes with an opportunity cost. In the case of the St Louis China Hub, the state wants to take $360 million dollars and subsidize private warehouses and such. That money comes from Missouri tax payers who will spend $360 million less throughout the state. Less clothes purchased at your favorite store. Less dining out at your favorite local restaurant. Less tickets to a ball game or concert. Less private money donated to charity.
Government subsidies always come at a cost to some other part of Missouri's economy.
Bureaucrats make bad economic choices. Senator Ridgeway views the China Hub effort as an improper attempt to use taxpayer money to bail out St Louis's Lambert, which has been plagued with debt and high airplane landing fees. Ridgeway pointed out in the Senate committee hearing that Lambert may not be getting much cargo based on their high prices. Lambert s fees are $8.00 per 1000 pounds of incoming air cargo compared to 2.00 at Kansas City and 4.00 at Chicago O'Hare.
Hard to get much market share when you are 4x higher priced than your competition.
Senator Crowell referred to the China Hub as "Error-tropolis" and that it will result in a loss of Missouri manufacturing jobs.
"Governor Nixon has called this debacle "Made in Missouri" and the central component is a tax credit that subsidizes the importation of China-made goods. Really? Folks, I can't make this stuff up!!!!" said Crowell.
Sweet-O deal going sour? from the Columbia Tribune - excerpt below.
A company that promised 600 jobs and drew Missouri Governor Jay Nixon to Moberly to announce $17.6 million in state aid is in financial trouble and could potentially stick the city with payments on a $39 million bond deal.
Mamtek International Ltd., a company with Chinese and American ownership, planned to make sucralose, a zero-calorie sweetener at the facility. The $65 million deal, ballyhooed at the start by former Gov. Bob Holden, chairman of the Midwest U.S.-China Association, was put together in 73 days last year and was supposed to include $8 million in private investment.
Moberly issued $39 million in bonds to build the Mamtek factory, buy and install the equipment and take care of other items necessary for the company to begin production. It was supposed to have put 116 people to work - perhaps as early as late last year, according to early reports - and double that employment within 18 months.
"I found out today that they are apparently in default and it is a serious issue for the state of Missouri and the city of Moberly, and I intend to find out how that happened and what can be done about it," Sen. Kurt Schaefer, R-Columbia, said last week.
Once again government made a bad economic choice. If it had been a really good business plan, private investors would fund the project, and the state would benefit from tax revenue.
States ask whether tax credits worth cost from the AP in Jefferson City
"There is a tension between just about everybody," said Missouri state Sen. Chuck Purgason, a Republican who has wavered on his stance. "You've got core Republican principles that government doesn't create jobs - the private sector creates meaningful jobs - and what you need is broad-based tax reform."
For others, he said, "their idea is for government to take money and incentivize aspects of trying to stimulate the economy."
You see, the state of Missouri creating jobs is a myth.
Any job created through economic intervention comes at the opportunity cost of a job some where else.
The solution is a hard pill to swallow. It's time to Stop tax credits. Stop subsidies. Stop picking winners and losers in the Missouri economy.
The best thing the Senate could do right now for the Missouri economy and Missouri taxpayers is to end the special session and go home without passing any economic interventionist bill.
In summary, the Missouri legislature should not pass the China Hub Aerotropolis bill because economic intervention is not the proper role of government and history shows an awful track record.
Fear of economic intervention is what is stalling our economic growth. Killing Aerotropolis should help restore confidence to business owners.
The tax credits may also be unconstitutional, but that is for another article.
For Liberty,
Paul Hamby
Maysville Missouri
816 632 0602
www.campaignforliberty.org
p.s. To learn more about free market economics go to:
http://mises.org/
Best first economic book:
How Capitalism Saved America by Thomas DiLorenzo. This is entertaining and written in terms that anyone can understand.
[end Paul Hamby excerpt]
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