Round Rock Texas: One of the top ten places to live the American Dream.

In a closed session last Thursday, the Round Rock city council had listed “deliberate the offer of a financial or other incentive to business prospects considering Round Rock as a location for new businesses that would bring economic development to the City.”

Because it was in a closed session I don’t know the specifics of the incentives offered or even the business it was offered to. That said, it is always important for progress that governments not try to pick winners and losers but rather let people in general do so by buying what products and services appeal to them.

So I decided to speak a short piece before the council. I’m reproducing it here as a blog post because I’m lazy.

We could all use a reduction on property taxes. For that matter, all the other taxes that might be waived for one business are taxes we all have to pay when we “Shop the Rock”² at businesses which are not given those incentives. Or in wages if we work for disfavored businesses.

It’s worse than that, though, because these incentives have a poor record on average anyway.

The companies that get these deals rarely live up to expectations. In one of the old state programs, only 2.3 percent of companies created the number of jobs that were announced. And even when the jobs numbers pan out, the taxpayer expense associated with the projects — some of which would have occurred without taxpayer support — puts in doubt the economic gains. Consequently, the state usually comes out behind.—Mackinac Center, James M. Hohman, Director of Fiscal Policy

But the truly dangerous aspect of this sort of corporate welfare is that excess bureaucracy, whether federal, state, or local, discourages the innovation that creates more wealth beyond the zero-sum that politicians see. An entrepreneur with a great idea isn’t likely to also be an expert in navigating complicated tax law or inveigling local governments to give them breaks on various tax laws, employment laws, or zoning laws. And so they simply don’t put their idea into practice for fear of arousing the power of the state against them.

I don’t think it’s a coincidence that the innovators who started California’s Silicon Valley boom^• grew up under the very conservative Reagan. He cut taxes, he cut regulations, and regardless of how much the counterculture members of the movement disliked him they could and did start up businesses—businesses involving soldering, programming, even mass production—literally in their garages, something that would likely tie then up in lawsuits long before they got a product out if they were to try it today.

That is the kind of innovative public policy that spurs innovation in other industries.