Wasting Economic Development Resources

To the Burlington Free Press editor:

Sunday's article about Vermont Businesses for Social Responsibility ("Business group pushes for change", August 5, 2007) quoted the Secretary of Commerce on Vermont's tax credit program: "It's a critical program that returns money to the state."

The only way this misguided program can return money to the state is if the businesses would not have invested money or hired workers without the tax credits (the infamous "but for"). This is a fantasy.

Businesses expand when it makes sense financially, and tax credits (or cash rebates as is the case today) are not sufficient to overcome the business cycle. The evidence is clear: 1) few businesses apply during economic downturns; 2) dozens of companies awarded credits never met their job creation requirements; and 3) some companies that got credits cut jobs later on.

However, it's not surprising that businesses apply. If the state chooses to give away taxpayer money, why shouldn't they?

In the end, corporate taxes are not much of a burden (see the recent Tax Study by the Joint Fiscal Office). More importantly, tax credits are not long-term investments. I commend Vermont Businesses for Social Responsibility for calling for a more responsible approach. We need it. The current one isn't working.

Doug Hoffer