Although Governor Stitt is politically conservative and has done a pretty good job so far of controlling the temptation to spend more money at the state level, there is one area where he appears to wish to considerably increase spending. The Governor is a staunch supporter of tax subsidies and cash incentives for businesses, otherwise known as corporate welfare. One prominent example is the state’s Quick Action Closing Fund. Last year, the governor asked the legislature for an additional $20 million infusion, and they obliged. The Quick Action Closing Fund was first created in 2011 as a means for then-Governor Fallin to dangle grants as lures for companies to locate and expand in Oklahoma. One way the closing fund’s creation was justified had to do with other states having similar funds, supposedly putting states without them at an economic disadvantage.
According to a recent article in The Oklahoman, Governor Stitt has spent from the closing fund at about the same rate as Fallin, but he has spent the money differently. Stitt’s spending has generally been spread out to more companies at smaller amounts. But recently, a $1.2 million grant was made to Limco Airepair and a $0.75 million grant was made to Prairie Surf Media. The first grant requires the company to make 200 hires with average annual salaries of almost $72,000 in 7 years. The second grant is to help renovate the Cox Center for video production studios with the promise of 10 new jobs averaging $100,000 in salary.
So let’s get this straight. Tax money collected from sales and income taxes across the state, including that collected from a kid who mows lawns to help the family by buying his own clothes, is being used to subsidize salaries between 32 and 92 percent higher than the average Oklahoma household’s income? Does anybody else see anything wrong with this?
No doubt, in Governor Stitt’s mind, in the minds of some business leaders, and in the minds of politicians in states across the country, the Quick Action Closing Fund and a number of similar corporate welfare subsidy and tax privilege schemes are a way to stimulate economic growth. But, it is simply not the job of elected politicians, no matter their backgrounds, to decide that it’s appropriate for poorer taxpayers to subsidize the jobs of richer ones.
There is a book by two Ivy League economists called Why Nations Fail wherein they contrast inclusive economic institutions to what they call extractive economic institutions. Inclusive institutions include the basics that the United States generally gets right, things like secure private property rights, basic regulation to prevent fraud, decent public infrastructure, and law and contract enforcement. Extractive institutions are those created by elites to preserve their elite, top-of-the-pyramid status. They’re the institutions that can best be described as those where people who’ve reached the top pull up the ladder behind them. These institutions include occupational licensing, excessive regulation that big businesses can handle but small ones can’t, land regulations that create scarcities and increase the wealth of current landowners, and yes, subsidies like the Quick Action Closing Fund.
Silly subsidies like the closing fund’s close cousin, the Quality Jobs programs, and tax privileges like the now-repealed but ongoing wind energy tax credits, are not so large compared to Oklahoma’s economy that they can turn Oklahoma into an impoverished banana republic. However, they are exactly the kinds of policies that keep banana republics today banana republics tomorrow. Frankly, the notion that politicians, even former mortgage bankers, or bureaucrats have the knowledge and foresight to beneficially speculate with taxpayer funds is absurd. And that’s all the closing fund and other programs like it do; they put politicians and bureaucrats, who suffer no personal losses if their speculations go awry, in charge of making speculative “investments” in private companies. And in the process, they extract from the unprivileged masses while giving to the privileged few.
The Quick Action Closing Fund is “reverse Robinhood,” it’s not “economic development,” and it’s not “competing.” Let’s call it what it is – thievery. And as in any situation where thievery becomes condoned and accepted, the net result for everyone is negative, not positive. Believing otherwise is just to kid ourselves into thinking something is being accomplished.
The opinions expressed in this blog are those of the author, and do not necessarily reflect the official position of 1889 Institute.