One of the most exasperating things encountered in discussing government policies is a lack of understanding by many of what causes corporations to move their operations and jobs overseas. They generally do not do it for greed as the purveyors of class envy would like one to believe because it is a very costly and risky enterprise to move overseas.
They do it in most instances because our government has made so many cumbersome costly laws, regulations and taxes that drive up the corporation’s costs and selling price of their goods to us, the consumers, that they can no longer produce competitively.
If the USA-domiciled company does not move their operation overseas under these conditions, they go bankrupt. The jobs would be lost anyway in most instances.
The politicians, after having caused the exodus of companies (and jobs) with costly anti-business legislation, then give tax breaks to corporations to lure others into their state. For example, North Carolina has the highest corporate tax rate in the Southeast, so it gives 10-year-tax-free status to companies as an incentive to move there. The NC government would have the same result in new jobs and companies setting up there if their corporate and personal income tax rates were lower than neighboring Southeastern states.
When I heard a local state senator (John Snow) brag about how many jobs he brought into the state by giving tax breaks to selected companies like Dell Computer, I asked him if he thought it was moral and ethical to ask people making $10.00 an hour living in the mountains to pay the taxes of Dell Computer in the Research Triangle with people making over $50.00 an hour.
He probably never looked at it in that way, perhaps because he does not have a firm understanding of how lasting jobs are created. (Dell has indicated it will leave the state when its tax breaks expire.) Or perhaps he is one of those politicians who loves giving special favors to big companies because their lobbyists give money to the politicians’ re-election campaigns.
Either way, when you take money from people who earn a living by making a product or service that people voluntarily buy and then give the money to a company which requires a subsidy as an incentive to set up locally, you are taking money out of the pockets of workers who could have used the money for additional purchases from another company which could have created more jobs as a result of more sales. Virtually everyone loses, especially the consumer.
The only one that benefits is the recipient of the gift subsidy, and then only for as long as the subsidies keep coming. Had the subsidized entity not received the special favor, in a free market, the consumer would be able to buy the best products for the lowest price. Until we have elected officials who understand how prosperity is created, we will continue to have a worsening economy.
James F. Davis is the president of Accuracy in Academia .