What Brown’s Budget Gets Right

by Matthew Glans on January 11, 2011

With states across the nation writing their 2011 budgets, many observers, including businesses and individual taxpayers, are hoping for a change in direction in states burdened by high spending and low tax revenue. In a new post on the Frum Forum, Eli Lehrer, vice president at Heartland’s Center on Finance, Insurance, and Real Estate discusses the proposed budget in California from new Governor Jerry Brown. Lehrer commends the new governor’s removal of business subsidies like special business tax breaks, “redevelopment authorities,” and enterprise zones.

“A quick look at Jerry Brown’s California budget reveals a pleasant surprise: The once and current California governor has proposed eliminating a huge swath of special business tax breaks, “redevelopment authorities,” enterprise zones, and other subsidies for business. He’s absolutely right.

Scads of research shows that special favors governments do for business often shift development or “poach” it from other states rather than stimulating new activity. Even when they truly create activity that wouldn’t exist in their absence, such activity simply amounts to a transfer of resources from taxpayers to the owners of businesses that do the things favored by politicians who hand out subsidies. This is deeply unfair.

Eliminating business subsidies won’t solve California’s fiscal ills or patch its gaping revenue holes, but Brown’s attacks on them show that, at least on one issue, the new governor is serious about fiscal responsibility.”

Eli argues that tax subsidy competition between states does little to encourage economic growth. Perhaps California can be a bellwether for good public policy for a change and other states will follow Governor Brown’s lead in eliminating bad business subsidies.

Lehrer’s article, “What Brown’s Budget Gets Right,” was originally posted on the Frum Forum and is available online at http://www.frumforum.com/what-browns-budget-gets-right.

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