Riding to the Hounds of Corporate Welfare

Oscar Wilde famously defined foxhunting as “the unspeakable in full pursuit of the uneatable.”

His quip aptly describes a sport popular in Missouri: The one that elected officials play when they use taxpayers’ money to support the growth of selected businesses or industries.

The attempt to single out economic winners through government planning and intervention is a dismal sport that can only end in disappointment and failure. The nutritional value of the object of the hunt may be safely described as zilch. If you eat the uneatable, you will only make yourself sick.

But you wouldn’t know that from the behavior of many of our elected officials of both parties.

Whooping and hollering, they ride to the hounds of corporate welfare—passing out hundreds of millions of dollars every year in targeted tax credits and other subsidies that go mainly to large and deep-pocketed corporations and a supporting cast of lawyers, developers, urban planners, and consultants.

In a recent report, the Mercatus Center at George Mason University identified Missouri as one of nine states that rank as “the corporate welfare kings of America.” According to Mercatus, Missouri has committed to more than $5.2 billion in subsidies to private businesses over the past couple of decades.

So how much good has being a “corporate welfare king” done for the people of Missouri? Has it made our state a magnet for growth and job creation?

Emphatically, not!

Over the last decade and a half, Missouri has lagged every other state in the nation but one in average annual economic growth.

In the 16 years from 1997 through 2013, real gross domestic product in the United States grew at an average annual rate of 2.23 percent. Meanwhile, Missouri grew at an average annual rate of just 1.08 percent—or less than half as fast as the national average. By this measure, Missouri ranked 49th out of the 50 states—just ahead of Michigan at the bottom of the barrel.

There are two things that typically can happen with taxpayer-assisted commercial developments—both bad.

The first is the support of bad ideas that would never get off the ground without the helping hand of government, such as the now-bankrupt and disbanded Mamtek artificial sweetener plant that was supposed to provide 600 jobs in Moberly. The CEO of Mamtek was recently sentenced to a seven-year prison term.

Second is wholly unnecessary pump priming at taxpayer expense. In our state, Tax Increment Financing (TIF) is commonly used to “induce” powerful companies and their allies in commercial development to do things they would do anyway, such as opening new stores or building more opulent corporate headquarters.

To cite two recent examples of the abuse of TIFs, Kansas City and the state of Missouri are prepared to pick up $1.6 billion out of the $4.3 billion cost of building a brand-new and super-deluxe corporate campus for the Cerner Corporation. If Cerner needs a corporate pleasure dome, it should pay for it on its own nickel.

Another egregious example of a private development that does not require or deserve public assistance through the grant of what amounts to a tax holiday from the property and sales taxes that apply to other businesses is the Whole Foods Market and high-rise apartment complex that is going up in Saint Louis’ trendy Central West End.

If Missouri wants to stimulate growth and job creation, the first step is to put a stop to corporate welfare, including the $400 million in targeted tax credits earmarked for commercial development that the state hands out on an annual basis. And that dictates the next step, which is to return the money to the people who earned it—through cuts in the state income tax.

Brenda Talent is the CEO at the Show-Me Institute.