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By David Stokes
Let the citizens of Ray County beware: You may think that a nice little sprinkling of government subsidies — done through something called an Enhanced Enterprise Zone — will be a painless way of promoting economic growth and prosperity in your county.
However, EEZs and other similar mechanisms have a long and sorry history of producing poor results. This lack of success has not discouraged the Missouri Department of Economic Development and the Mid-American Regional Council from actively promoting them around the state.
The DED and MARC’s goal is to start as many programs as possible; whether they work is beside the point. Like gunslingers in old-fashioned Westerns, all they care about is putting more notches on their belts.
Ray County is currently establishing eight different EEZ districts under one county umbrella. This is a massive bet government planners make that they know what, where, and how economic growth will occur in the county over the next two decades.
I have studied the results of Enterprise Zones (EZs, the very similar precursors to EEZs in Missouri) in counties that adopted large EZs in the 1980s.
The economic data shows that the counties that adopted these zones did no better than neighboring counties that did not. Government planners cannot see the future, and they should not be empowered to use tax dollars to bet on it.
The dirty little secret that the DED, MARC, and the Ray County EEZ proponents do not want you to know is that EEZ, Tax Increment Financing Transportation Development Districts, and other similar subsidies do not work.
They do not succeed in growing the local economy. All this myriad of subsidies does is shrink the local tax base, encourage more government planning of the economy, and increase the chances of eminent domain abuse.
As a famous Swedish economist once said, “It is not by planting trees or subsidizing tree planting in a desert created by politicians that the government can promote . . . industry, but by refraining from measures that create a desert environment.”
If you ask a DED or MARC official how effective EEZs are, they will tell you how much investment has occurred within EEZs over the past decade Their lie-by-omission is that they have no idea how much the EEZ aided that investment and how much would have occurred anyway.
The consensus among economists is that special tax incentives such as EEZs matter little, and only a very small portion, if any, of new investments within a zone can be credited to the subsidies. Yet government planners will happily let people believe the incentives make all the difference.
Tools such as EEZs fail because politicians cannot see the future better than markets can. Ray County should focus on low taxes for all businesses, not special incentives for a few. It already has the lowest commercial property tax surcharge in the region. It does not need a massive implementation of Enhanced Enterprise Zones.
David Stokes is a policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy. Phone: 314-454-0647, www.showmeinstitute.org