For most people, Christmas comes but once a year. But for some politically powerful retailers and commercial developers, Christmas comes every day, thanks to massive giveaways by local Valley governments. Guess who gets to pick up the tab for such generosity? Not he man in the red suit, but the taxpayers.
Corporate welfare dollars are flying so fast its tough to keep up with them. Scottsdale offers $7.5 million to build a car dealership on its side of Scottsdale Road while Phoenix offers $12.7 million to United Auto Group to build on its side of the road. Mesa raises the stakes by giving $25.7 million to a sports car retailer to locate there.
For a while, Chandlers $41 million subsidy to develop the Chandler Fashion Center was the top of the heap, but then Gilbert jumped in with a $60 million offer to Bill Lund to build a 17-dealer auto mall. Then Phoenix, not to be outdone, proposed $100 million to subsidize CityNorth, a new upscale shopping mall. But once again, the west Valley topped all, offering a whopping quarter-billion-dollar subsidy to Westcor to develop a new mall.
The city governments justify the subsidies as making economic common-sense. Most of the subsidies take the form of sales-tax rebates the retailer simply keeps a share of the tax receipts it generates. And with new businesses come jobs. Everyone wins, right?
Wrong. We dont have to bribe businesspeople to sell their wares. Retail development follows affluent population growth like night follows day. Incentives may induce a particular business to open in a particular place but if there are profits to be made, they will come regardless. Government should not choose economic winners and losers; consumers should.
Subsidies also create and unequal playing field. The vast majority of businesses operate without subsidies most of them small enterprises and are forced to bear the tax burden for their competitors. Ultimately, the skewed tax structure burdens all of us.
Subsidies are not only unfair and unwise, theyre unconstitutional. The framers of the Arizona Constitution, fed up with giveaways to the railroads in the 1800s, provided that governments shall not ever make any donation or grant, by subsidy or otherwise, to any corporation. Likewise, our state Constitution guarantees equal privileges and immunities to all citizens. These subsidies violate both of theses provisions when properly applied.
Judicial decisions have eroded the scope of the anti-gift clause. But the latest subsidies exceed all bounds of logic and law. Just as they did when they abused their power of eminent domain, cities have demonstrated a complete lack of restraint and sound judgment in the frenzy to outbid one another in the war of subsidies. And just as they did when they curbed eminent domain abuse, the legislature, the courts and the citizens need to impose and enforce limits.
Are governments powerless to attract new businesses? Of course not: as the Goldwater Institute persistently argues, they can, and should, create hospitable tax and regulatory environments. When they do, everyone benefits not just a privileged few. Instead, too many local governments impose massive sales taxes and then selectively rebate them, while everyone else has to pay.
Its bad enough when government plays Santa Claus. Its even worse when it plays Robin Hood in reverse, taking from ordinary taxpayers and businesspeople to benefit the wealthy and politically powerful. Fortunately, our Constitutions framers saw it coming and acted to prevent it. But its up to us to vindicate their wisdom.