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IDED: THE MORE YOU SPEND, THE MORE YOU SAVE
June 20, 2006
Everyone has seen department store sale ads breathlessly intoning "the more you spend, the more you save!" The arithmetic seems almost plausible, until you think about it for a half-second. Then you realize the "savings" exist only if you assume away every possible use of your money other than buying things at that store.
The Iowa Department of Economic Development yesterday released a report trumpteting the successes of the Iowa Values Fund grants and incentives for small businesses. The report identifies the number of jobs "created and retained" by the IVF tax credits and incentives.
The math behind these claims is a lot like the math of the department store circular. The IDED assumes away other possible uses for the money spent on the funds. It also ignores the effects on other businesses whose competitors are subsidized by the IVF and who have to pay the higher taxes to fund it. The IDED also has no way to tell how many jobs would have been created in other ways absent the IVF funding, via banks or investors.
When all of the hidden costs are taken into account, there's no way that taxing Iowans and their businesses to lure and subsidize their competitors is a net gain to Iowa's economy.
Link: Des Moines Register Coverage
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