Tax Analysts Blog

Soviets Run Mississippi, Planned Economies and All

Posted on May 22, 2013

My friends at Good Jobs First released a report on Mississippi tax incentives recently that liberals, small government conservatives, and libertarians should find appalling. Between corporate tax breaks, withholding tax rebates, property tax abatements, and infrastructure and training grants, the state has given Nissan $1.3 billion over the past decade. Everyone should be appalled for a variety of reasons.

First, this is the epitome of government intrusion in the marketplace. A bunch of Mississippi politicians deciding what economy in their state will be is no different than Khrushchev and his cronies doing it. The politicians think they are smarter than the market, smarter than the people, and, well, smarter than everyone. But they’re not. Planned economies are never as efficient as the free market. Politicians who believe so are kidding themselves.

But, second, despite the absurdity of the Mississippi legislature playing the architect of economy policy, such public largesse is almost always unnecessary. Corporations make location decisions based on a three main factors: labor costs, access to markets, and qualified workforce. Without these factors no amount of tax incentives will ever convince a business to invest in a particular place. There is scholarly research and a ton of anecdotal evidence showing that businesses do not make location decisions based on tax incentives. Don’t believe me? President Bush’s Secretary of the Treasury Paul O’Neill, who led Alcoa and International Paper, said at his confirmation hearing: "I never made an investment decision based on the tax code. Good businesspeople don't do something because of [tax] inducements."

Third, Mississippi spent over a billion dollars helping a giant international automobile company. It made almost 5 million vehicles in 2012 and had about $88 billion in revenue. It’s not exactly the Little Sisters of the Poor. I am thinking that Mississippi could have used that billion for teachers, police officers, improving the university system, or tax cuts for everybody. No, the politburo in Jackson made the determination that Nissan should be the beneficiary of the state’s largess. And that is a shame. Good Jobs First should be applauded for continuing to fight this fight. And we should all take notice.

Read Comments (4)

Ms. WMay 22, 2013

Someone should look at how much Intel has been given in each state. Start
first with getting state after state, after they arrive, to change to single
sales factor taxing for corporations.

David BrunoriMay 23, 2013

Ms. W that is an terrific suggestion. I think we will get our crack reporters
looking at that very question.

Salt Practitioner, My only problem with your argument is that I believe Nissan
would have moved to to MS without the incentives. If true, that is $1.3 b out
the door.

SALT PractitionerMay 24, 2013

Just curious, have you determined what the incremental hiring headcount number
was pre- and -post Nissan plant? How much did all Nissan MS employees pay in
MS personal income taxes, sales taxes, property taxes, etc.? The $1.3 billion
the state has giving Nissan should be subtracted from this number to determine
if MS is truly "out-of-pocket" as you suggest. I would guess that the reality
is that Nissan is making a significant contribution to the MS state tax base.

Gaius BaltarMay 28, 2013

Just tax handouts like this. States can still engage in Soviet-style central
planning for their economy. But income is income, and these handouts are
income. If necessary, amend the Code to reach this result.

Perhaps then we'd stop the gutting of state and local tax bases.

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