They won't succeed. Nobody can compete against Elon Musk. Elon could build a better manufacturing plant using nothing but his bare hands and a couple of paperclips.
Totally fine for California. I'm deeply convinced that tax incentives have negative impacts on the places that offer them. They only seem to attract race to the bottom businesses.
> Why is competition good for private goods and services, but bad for government goods and services?
Oh, it definitely is. But here's the thing: in this case it's like your salepeople selling below cost at the end of a quarter to meet their targets. That's not good for the company.
States should compete on overall tax, not on exceptions given to a handful of well-connected companies and individuals.
Sure. Let me first start with this: There are four classifications to spending money (in this context):
1) spending your own money on yourself - this yields the most appropriate level of thriftiness and the most appropriate level of focus on the individual's needs.
2) spending your own money on others - this yields an appropriate level of thriftiness (I can only spend so much on Jane's birthday gift), but your ability to best predict the recipient's needs is lower than the individual. i.e. Jane would never spend this much money on a coffee maker, so I will.
3) spending other people's money on yourself - this yields a poor level of thriftiness (Its not my money!!!), but it does get spent on things the individual wants (although a bit more recklessly).
4) spending other people's money on other people - this yields a poor level of thriftiness and a poor level of focus on the individual's needs and wants.
With this groundwork laid, now I can answer your question. Companies spend their own money to deliver a product or service to market because of the profit associated with the effort. At some point, that effort isn't worth it, and the participation in the race to the bottom ends. Hence, companies that can profit at the end of the race win, and consumers win because the goods or services are much lower priced.
However, governments don't follow the same thought process. When the profit of participating in a market (attracting businesses) disappears or never appears, they don't experience the negative response and therefore don't make the same decisions as companies would. They may stay in this particular market longer than they should and their drive to participate in the market may not be measured in profits. However, somebody is paying for this endeavor. Taxpayers don't get a choice to "opt-out" of these decisions. Further, a fraction of the tax base may want to spend other people's money attracting businesses (via taxes) however very rarely will write a check to do so, indicating it's only worth it if its with other people's money (see #3).
I guess my comment back would be it appears that this is an issue with governments, not with competition. I would hope that the government has some incentive to spend tax payers' money wisely (re-election would probably be the only one).
Ignoring the whole "lets give tax breaks to businesses that move here" issue, I think we'd all be better off if there was a strong incentive for the appropriate spending of tax payer money.
I mean Singapore seems to do it reasonably well, why can't we. And yes, I know a little about how Singapore trainings and attracts top talent to government.
Unfortunately (in the USA) due to our current campaign financing situation, lobbying and media outlet consolidation the elected representatives voting to write big government checks are far more beholden to the corporations than to the people, which explains the crazy boondoggles like the TSA and congress buying military hardware the military doesn't even want (causing it to be regifted to local police, causing all sorts of carry-on negative impact).
And then those same corporations/wealthy individuals that profit from this system point to it as an example of how the government can't be trusted with our money and thus shouldn't be allowed to regulate anything they do.
The entire system is just ridiculous at this point and possibly unfixable (without some kind of huge society-shifting event).
Companies don't spend their own money. The people who work for a company spend their investors' money, and their interests are only partially aligned.
People spending company money are sometimes far less thrifty than either people spending their own money or government employees, so I don't think you can rank them based on thriftiness. Nor do established companies necessarily provide better service than government organizations. These things depend more on the particular organization's culture and governance, not on whether it's a business or a government.
Just focus on the first half of the statement. Governments spend other peoples' money. There's less of a direct connection between value for money received. The interest group that benefits may have a much larger interest in the deal going through than the masses who actually pay the taxes -- like any other kind of lobbying.
Plus the usual; politicians might be reaping short-term benefits but making long-term payments that happen long after they leave office.
Not sure that I agree that gov'ts spend other people's money. Once I pay taxes, it's no longer my money. I don't see it as that different from car insurance for example, I pay now for a future benefit.
That said, the connection between the money and the value may not be as clear. It's more holistic than anything else you might spend money on.
In terms of lobbyists or politicians playing funny with these deals, that's more a problem with the gov't than these deals.
I guess my point is that the "race to the bottom" has already born out benefits. This list of "most efficient gov'ts" has Qatar, Singapore and Finland on the list, so it's not like it's already happening.
>> Totally fine for California. I'm deeply convinced that tax incentives have negative impacts on the places that offer them. They only seem to attract race to the bottom businesses.
Negative how? It's not a choice between a company that pays full taxes and a company that gets a tax break. It's a choice between a plant or an empty patch of desert.
It's not just the plant, either. It's all the ancillary business activity that comes with a billion dollar plant: construction, real estate, raw materials, transportation, food services, advertising, janitorial, office supplies, security, legal services, etc.
All those employees will spend money, too: houses, clothing, food, furniture, entertainment, insurance, cars....
I don't understand why people oppose investment incentives unless they're wealthy enough to not need the additional prosperity.
If I were running a state (or the whole country for that matter), I'd be encouraging business investment like crazy. It's the ticket to prosperity. The Asians get it. Seems like we in the West no longer get it.
I think a lot of it comes down to governments settling for crappy agreements. You do hear about businesses getting big tax breaks, then shutting down two years later. Smart agreements would allow the gov't to get some sort of restitution. Why not provide a future tax break? Put the taxes you'd normally pay in escrow and release them when the company meets it's obligations?
I just find the idea that private businesses are "taking advantage" of governments with these agreements. Really? A private company is pulling the wools over a sovereign power with the ability to create and enforce it's own laws?
I like the escrow idea. I've also seen forgivable loans based on certain obligations (hiring, salary levels, etc.)
But they are taking advantage of a bunch of things; local governments inability to govern certain areas (whether due to state or federal laws) or that the mayor is thinking about election time and who would say jobs are bad?
The way they sold the Caterpillar plant down the road was by saying it might come out neutral with the tax incentives, but it would need a lot of other businesses nearby to support it.
I don't know if that worked out, but Barrow County (location of the plant) has a lot more businesses today than it did in 2013 when it opened. That could just be that it also filled out a big retail development (Barrow Crossing) and started on another (https://www.facebook.com/Gateway-at-University-Parkway-14074...)
