Economic Development or Corporate Welfare?

Another way to transfer wealth?

Supposedly economic development improves a community's economic well-being and quality of life through policies, programs, and activities that are focused on creating jobs, attracting new businesses, and fostering economic growth.

One has to wonder if economic development is helpful or just a handout to corporations and select individuals.

In South Dakota, economic development is funded by tax dollars, whether it is the Governor’s Office of Economic Development (see page 01-5 of the document — about $7.5 million in general tax funds from South Dakota, about $30 million from taxpayers around the country, and another $40+ million from a variety of sources) or the Sioux Falls Development Foundation (money from the City of Sioux Falls, see page 117 of the budget, and businesses that want a say in which companies locate in the city).

In South Dakota, a corporation could participate in an economic development program and meet all the employment requirements but could supplement with foreign workers (on work visas) to drive real wages down. In this case, the corporation gets a taxpayer handout and lower wages. Also, they shift the cost of housing (taxpayer subsidized affordable housing), transportation (public transportation), and schooling (often the children of the foreign workers are not at grade level and require special programs and extra costs for the taxpayers) for the low wage workers to the taxpayers. So the taxpayer pays for the economic development and is rewarded with lower wages and additional costs (that they have to cover with their taxes).

It is interesting that Senators Thune and Rounds and Representative Johnson recently issued a statement about labor trafficking related to foreign workers. Why would they have to issue a statement if there isn’t a problem? The argument is companies cannot find workers, so foreign workers are necessary. Normally when a company cannot find workers it isn’t because the workers don’t exist, but because the company is not paying enough money to attract talent or the government is paying these workers too much to stay at home. Has anyone checked to see if this might be the case in South Dakota?

Also, it is interesting to look at the Sioux Falls Development Foundation. This organization provides training and access to tax free industrial parks. As is true with most development organizations, the focus is on companies that provide a lot of jobs. What happens if a smaller company needs training? Small companies don’t provide a lot of jobs, but there are a lot of small organizations and they all pay taxes.

In addition, the Sioux Falls Development Foundation has a board of business people who screen applicants who want to locate in tax free zones. Could these people deny competitors access? Is it fair for one company to get tax free status and another one to pay taxes? Shouldn’t everyone pay their share and get the same benefits regardless of their size?

Of course we want thriving communities, but one has to wonder how taking tax money from a large group of people and giving it to a few corporations is helpful or fair. Maybe we just need to reduce spending and taxes and allow the market to create jobs.