Message to Missouri: Please Don’t Retaliate With Tax Incentives!

According to the Saint Louis Business Journal, the Illinois state government pledged a $2.3 million business investment package to help Boeing open a manufacturing plant at MidAmerica Airport in Mascoutah, Ill.

Additionally, the article reports that “Boeing is Missouri’s largest manufacturer.”

I worry that this fact will mean that the Missouri state government will offer retaliatory tax incentives to Boeing in order “to keep these jobs in Missouri.” Economic development is not a zero sum game, and states should hesitate to view each others’ economic growth with antagonism. Both Missouri and Illinois will be better off if they specialized and engaged in mutually-beneficial trade instead of spending taxpayer money to compete over the same activities. Government intervention in interstate trade hurts business and discourages economic growth, defeating its ostensible intended purposes.

I also want to point out that Illinois is spending $2.3 million for 75 jobs, which is an expenditure of nearly $31,000 per job. This means that the project is already in the hole by this amount, plus deadweight loss.

Furthermore, Boeing and the state government may say that these 75 jobs are new. However, even if they are created as a consequence of the subsidy, they are not really new. This is because they represent the jobs that were destroyed by the $2.3 million that was taken from the taxpayers of Illinois.