Monday, February 2, 2009

Do tax cuts for business help police and government employment?

Today's Wall Street Journal touches on an interesting point - do tax cuts for business result in more resources for public service jobs, police jobs, and other in fracture, or less?

State governments often give business large tax cuts or tax holidays to locate within their boundaries. Proponents of these cuts argue that these business bring workers who pay taxes and help finance government services.

Opponents of such tax cuts argue that instead these states are in a "race to the bottom". Each state competes against each other to the point where the value of the benefits given to the business exceeds the value of the jobs created.

This is of course an open question in employment economics. I think the answer is the tax cuts to attract businesses generally help create income for the state to finance police employment. However, states should be careful not to provide "corporate welfare" that actually reduces their current available budget for civic infrastructure and employment.

No comments:

Post a Comment