Hint: It’s not helping new, big business
Last Friday I posted on Facebook’s Erath County Rants and Raves a “rant” about the decision of the Stephenville City Council’s Finance Committee to recommend that the Council once again grant a tax break to the owners of the Hoffbrau restaurants who want to establish a new restaurant in Stephenville. The reaction on Facebook my rant provoked exceeded my wildest imagination. Well over a hundred readers “liked” my comments, and scores debated the fairness of tax breaks. Some agreed with me that it’s unfair to give tax breaks to some but not for others, but many argued that the need for new businesses to fuel economic growth was great enough to justify tax breaks. The most fascinating comments were those of business owners who nonetheless said that in the interest of economic growth they favored tax breaks even for prospective competitors.
I’ve argued in the past that tax breaks are a bad idea partly because they represent the government’s attempts to pick economic winners and losers. The government wants to try to predict which new businesses will most likely succeed, and help them accordingly. I personally have less confidence in the ability of either the City Council or SEDA to predict business successes and failures in advance. I have far more confidence in the ability of the free market, representing thousands of decisions made each day by consumers, to sort the winners and the losers, and reward or penalize accordingly.
More to the point, I simply think it’s unfair for the government to give tax breaks to some and not to others, and I think it’s especially egregious to require prosperous businesses, through taxation, to help finance prospective rivals—talk about making someone dig his own grave!
But as I noted above, many—including business owners willing to have the government help finance their competitors—disagree. They advocate tax breaks to help establish new businesses or prop up ailing businesses, believing that the increased competition will produce more business for everyone.
Nothing I’ve read or been told has convinced me that the government should do more than:
- provide quality services;
- maintain a reasonable tax rate high enough to finance quality services but not so high as to actually stifle economic activity;
- keep the rules for competition short, simple, and easy to understand; and
- maintain a level playing field with equality for everyone under the law—in other words, fairness for all, favoritism for none.
But for those who believe government should play favorites and actively help some but not others, I have a suggestion—put your money where your mouth is, and help your favorites.
There’s no good reason why private individuals and organizations such as the Chamber of Commerce and STEDCO can’t provide financial aid to new or ailing businesses—after all, how private entities choose to spend their own money is their own business. For example, a local restaurant owner has said he favors aid to the prospective Hoffbrau –established restaurant because he thinks it will stimulate more economic activity from which he, too, will benefit. So why can’t he and other like-minded restaurant owners in Stephenville pay the new restaurant’s taxes? Doing so would be a form of investment from which they could reap the returns.
And what about the funds already accumulated, or set to be accumulated by the government under Prop 1? I have two suggestions: First, they can be used to finance infrastructure as Prop 1’s propagandists promised. The better the infrastructure and other services provided, the more attractive Stephenville will be to invest in, with or without tax breaks.
Or—and this may sound a little too radical, but I’ll toss it out anyway—the funds can be used to finance tax cuts or rebates to the taxpayers. After all, we the people pay the taxes, so why can’t we the people get some breaks as well?
Malcolm L. Cross has lived in Stephenville and taught politics and government at Tarleton since 1987. His political and civic activities include service on the Stephenville City Council (2000-2014) and on the Erath County Republican Executive Committee (1990 to the present). He was Mayor Pro Tem of Stephenville from 2008 to 2014. He is a member of St. Luke’s Episcopal Church and the Stephenville Rotary Club, and does volunteer work for the Boy Scouts of America. Views expressed in this column are his and do not reflect those of The Flash as a whole.