It makes your head spin! Two months ago, Gov. Jay Nixon vetoed a bill that would have provided some tax relief for all Missourians. Today he is calling for a gigantic tax cut — amounting to an estimated $150 million a year or $1.5 billion over the course of a decade — for one company.
The governor is hoping that would be enough to entice the Boeing Company to locate its 777X commercial airplane assembly plant in north St. Louis County.
In vetoing House Bill 253 earlier this year, Nixon went around the state arguing that cutting state income taxes for individuals and corporations would harm education and mental health. Where is the same concern today in offering a lavish gift to a single, deep-pocketed company?
If Boeing is short of the cash needed to build the new airliner, you wouldn’t know it from its generosity in compensating its top executives. In 2012 Boeing CEO Jim McNerney received $21.1 million in compensation — or 469 times the median family income in Missouri. J. Michael Luttig, the top lawyer at Boeing and a former federal judge, had $9.6 million in compensation in 2012 — or 214 times the median family income in Missouri. No doubt the Boeing general counsel is highly skilled in minimizing taxes (Boeing reportedly paid no federal taxes from 2008 to 2010) and maximizing tax rebates and other forms of corporate welfare.
How much should a state (and Missouri is just one of about a dozen states waving fistfuls of cash in trying to get Boeing’s attention) be willing to pay a company like Boeing to open a plant and create jobs?
Nixon is urging Missouri lawmakers to adopt a special tax package that would pay Boeing up to $75,000 per job per year — based on annual subsidies of $150 million spread over a minimum requirement of 2,000 jobs. No doubt that will strike some observers as money well spent — given much higher subsidy costs in other areas, such as solar energy, where federal subsidies have exceeded $350,000 per job.
Nevertheless, there are good reasons for being strongly opposed to the Boeing package.
First, it is crony capitalism and a misuse of taxpayers’ money. It makes the same mistake that many cities and town have made in cutting deals for Walmart and other big-name retailers that are not available to smaller retailers in the same community. It unfairly and unwisely diverts scarce resources to businesses with the biggest and most powerful lobbying organizations.
Second, tax credits are not free money. Our state government is supposedly straining to meet its current commitments. Every dollar that is given away in tax credits is a dollar that the state government must replace with cuts in current programs, or — more likely — increased taxation.
And third, there is a better way to promote business and job growth. Instead of chasing after Boeing and other corporate behemoths with more hand-outs, Missouri lawmakers should do something truly innovative: They should lower taxes across the board for all Missourians. That way, growth can occur organically, and in ways that politicians and lawmakers cannot even begin to anticipate.
Mr. Wilson wrote this article in his position as a resident fellow and senior writer at the Show-Me Institute, a free-market think tank based in St. Louis.