Posted by
John R. LaPlante on Monday, October 02, 2006 10:02:30 AM
Business owners, how’d you like to subsidize your competition?
Competition that is tough, but does not involve special favors from government, is good for the economy and for the consumer. Ultimately it’s good for the activity known as business, even if responding to competition can be rough on a particular business. Unfortunately, government often steps in to distort the competitive process.
The Allegheny Institute for Public Policy, a Pittsburgh-based and focused organization, has long had an interest in economic development. In a recent policy brief called Predictable Effects of Tax-Supported Mega Malls Comes to Light [PDF], the Institute talks about a business owner’s nightmare: seeing the government actively support the competition.
Through Tax Increment Financing (TIF), governments give favorable tax treatment to businesses, in exchange for promises of jobs. Of course, many an ambitious business owner would like to gain more employees over time, so TIF can lend itself to favoritism.
The Pittsburgh Mills development is a TIF project that has now claimed two businesses that could not compete against a tax-advantaged competition. The city is now left with two fewer employers, and taxpayers have, in effect, made government a business partner of some local firms. Not only do residents lose business establishments to patronize, they also lose companies that had been paying taxes. So who gets to pick up the slack? You get one guess.