Mask production
Corianna Baier

When the country needed more personal protective equipment (PPE), many PPE-producing companies ramped up production, while other companies started making these products. Now, Missouri lawmakers want to give a tax incentive to PPE-producing companies that expand or relocate to Missouri. Does this raise some red flags? It should.

A tax incentive is meant to lower the tax burden on a business in order to achieve a desired outcome. For example, if the state wanted more boat production, then it could create a tax incentive for boat production, which lowers the cost of producing boats and might increase the supply.

Whether you agree with tax incentives in general or not, the logic here with PPE doesn’t work. The desired outcome—more PPE production—is already happening in the market. The demand for PPE rose drastically due to the pandemic, and suppliers have responded by expanding and shifting production. Firms will continue to respond as long as the demand remains high.

Even if you support tax incentives, the timing here is backward. Why would Missouri subsidize something that is already happening? The market has already incentivized companies to produce PPE; there is no reason to give handouts to try and steer the market when the market is already doing its job.

In this case, there is no reason to give away future tax dollars through government handouts. Additionally, should the state be giving away future tax dollars when the budget will suffer huge hits from the pandemic? Missouri has a rocky history with tax incentives, and this would be an unnecessary addition.

 

About the Author

Corianna Baier
Corianna Baier
Analyst

Corianna grew up in Michigan, where she earned her B.S. in Economics from Hillsdale College.