Saturday, July 07, 2007

Why Have Good State Tax Policy When Targeted Tax Incentives Are So Much Fun For Politicians?

There is little doubt that most of the legislative opponents to energy company tax incentives in July will have a miraculous change of heart in January.

In fact, the letter Jody Richards' handlers intended for him to wave around dramatically during his floor speech Thursday promises Peabody's Rick Bowen they will:

As you know from the ongoing representations, both individually and collectively, of the undersigned there is a demonstrated record in the Kentucky House of Representatives of our desire to foster a favorable atmosphere for projects that will reduce our nation's dependence on foreign oil while taking advantage of Kentucky's unique abundance of the requisite natural resources. In the spirit of that desire and given the uncertainty of the specifics or feasibility of your project as referenced in your July 3, '07 letter, each of us wish to assure you of our willingness to enact appropriate financial incentives during the January 08' regular session of the Kentucky General Assembly that will facilitate your project; make KY a leader in this promising new industry; and be in the best interest of the people of the Commonwealth.

The letter was signed by the Democratic Party leaders in the House of Representatives. I typed it exactly as the letter was written.

What is lost in all this mess is that if we just set corporate tax policy that would work for everyone, we wouldn't have to engage in these counterproductive incentive programs.

The Tax Foundation sums it up pretty well in one sentence:

Tax preferences designed to boost corporate investment may provide short-term advantages to some companies—and allow lawmakers to take credit for new jobs in campaign speeches—but in the long run they add enormous complexity to the code, and ultimately transform the tax system into an economic minefield of narrow bases and punitively high rates.

It is clear that what House Dems are waiting for is a new governor, but we should embrace the opportunity to reform our tax code for everyone and not just for individual out-of-state companies on a case-by-case basis.