Liberty Thought of the Week

Liberty Thought of the Week

Paul Hamby

The temptation of giving away other people’s money in the name of creating jobs

The Missouri Legislature is back in session. Committee assignments are made. Hearings are scheduled and the work of making new laws and tax policies is under way.

Each year, there are many proposals to use your tax dollars to subsidize businesses in the name of creating jobs.

The state is filled with more than 100 ‘professionals’ working full time to come up with new ideas on how to use your tax dollars as an incentive to bring new jobs to our state. There is quite a legacy of wasted tax dollars for what sounded like good intentions.

For example, in 2011, Moberly Missouri residents got quite a shock when they discovered that their city had guaranteed $39 million in bonds to help a Chinese company build a plant, called Mamtek, to produce sucralose, an artificial sweetener.

The Missouri State Department of Economic Development promoted the Mamtek project for Bruce Cole all across Missouri. Cole promised to employ up to 600 people. Moberly took the bait. Governor Jay Nixon joined Cole for a July 2010 announcement to tout $17.6 million in state incentives for the manufacturing plant. Moberly city council secured the $39 million dollars requested. Plus, Mamtek was going to benefit from five state-administered programs and be exempt from county property tax.

Only 4 people were ever hired. The plant construction was started but not finished. No product was ever produced. Mamtek defaulted on its payments in 2011, forcing the city of Moberly to default on the bond payments. Cole looted the bond money for personal benefit and the whole project ended in Bankruptcy in November 2011.

There are many similar stories of failed eco-devo projects that were subsidized by Missouri taxpayers over the years.

There are also many taxpayer subsidized projects that succeeded. The problem with this is it distorts the free market - favoring businesses with political connections.

New subsidized business startups always seem to come with a bag of tax credits, property tax waivers, stimulus money and other handouts to sweeten the deal. That means existing businesses are unfairly subsidizing the new startup businesses the eco devo salesman might bring in.

Amazon is a classic example. In 2016, Amazon built a new warehouse in Wyandotte County. They received millions of dollars in incentives and tax breaks.

Meanwhile the unintended consequence is that the local hardware stores, grocery stores and auto parts stores lost sales to Amazon while having to subsidize the government incentives given to Amazon.

Say it Loud! But they brought new jobs to KC! Truth is Amazon distribution center locations are based on highway and population centers - Just Like Walmart - The government subsidies are likely not even in the top 10 reasons for choosing a location.

In the Missouri Senate, the 2025 chair of the 7 member economic development committee is Ben Brown. In the Missouri House, the 2025 chair of the 17 member economic development committee is Sherri Gallick.

Senator Brown and Rep Gallick, the role of government is not to pick winners and losers, but instead is to create an environment of economic freedom, which is a tide that raises all boats. Please say no to spending taxpayer money on more economic development subsidies.

Let the free market determine what new businesses are needed.