Friday, January 21, 2011

Akindele Akinyemi: Is Higher Taxes The Goal for Urban America?

Akindele Akinyemi, the urban conservative activist from Detroit begs the question: Is Higher Taxes The Goal for Urban America?

Akindele is one the foremost urban conservative policy figures stressing the importance of education, family policy and economics. Mr. Akinyemi is an independent Republican who is the author of “Academic Revolution”, a series of essays dealing with the neeed for more specialized charter schools in urban communities. He has a B.S in African American Studies from Eastern Michigan University in Ypsilanti, Michigan and a M.A. in Education with an emphasis in Curriculum and Instruction
By Akindele Akinyemi

The problem with business subsidies is that while they may benefit the targeted business and entice it to locate its operations within the county, they harm existing business and other taxpayers. Such policies do not generate net benefits for a city. Instead they simply hurt some and help others.

Therefore, there’s no such thing as a free subsidy. When a city decides to use tax dollars to entice a new company to set up shop in a community, that money has to come from somewhere. Local businesses and their employees must pay more in taxes and other costs to support the subsidized industry. This is why such programs are referred to as corporate welfare. Since higher taxes are an added cost of doing business, these subsidies depress economic growth for those businesses not receiving the subsidy. In reality the subsidies end up being a mechanism for transferring wealth from existing businesses to the subsidized businesses and the people who work for them.

Higher taxes for our cities at-large are not the only way existing businesses must pay the cost of these subsidies. The subsidized entrants into the market add to the demand for workers, driving up labor costs for all businesses that are employing similarly skilled labor. This effect is particularly pronounced if the unemployment rate is already low. This means that the existing businesses not only have to pay for the subsidies through higher taxes, but, adding insult to injury, they may also face higher production costs.

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1 comment:

Anonymous said...

Nice piece. Do not forget the simple point that when governments "invest" they generally have less knowledge about the particular business or market than someone who is reaching into his own (or relative's) pockets to start or continue selling a service or product. This inherent lack of knowledge puts the government "investment" in a disadvantage. When it is your own money at stake, you examine every facet of cost: labor, materials, time, machinery, delivery and profit. Bureaucrats neither know or care about most of those things.

It is hard enough for smart people incentivized by profit to actually succeed in business. The knuckleheads in government only speechify that they know what they are doing.