Then the coal company came with the world's largest shovel
And they tortured the timber and stripped all the land
Well, they dug for their coal till the land was forsaken
Then they wrote it all down as the progress of man.
And daddy won't you take me back to Muhlenberg County
Down by the Green River where Paradise lay
Well, I'm sorry my son, but you're too late in asking
Mister Peabody's coal train has hauled it away
From the Herald-Leader:
“Gov. Ernie Fletcher and leading lawmakers proclaimed a victory for Kentucky when they agreed last week to return to Frankfort Monday and work on a multimillion-dollar package of tax incentives to lure a $3 billion coal-gasification plant to Western Kentucky.”
Why does spending millions of dollars of our tax money to help Mr. Peabody not thrill me?
Maybe John Prine made me a bigot but here is one simple question:
If our leaders can come up with a multiple million dollar incentive package for Peabody, why do they lack the ability to reform Kentucky’s tax laws so that they could adequately support government services?
Or at the very least why can they not pass a reasonable tax increase on cigarettes?
Of course, there is the question of whether this type of tax incentive works?
From the Center for Economic Development:
Researchers have also cautioned planners about the use of tax incentive programs. First, tax incentives may foster development by reducing business costs, but they can indirectly impede development if they reduce expenditures on public services that businesses value. (Bradbury, Kodrzycki &Tannenwald 1997). Second, it may be unrealistic to expect incentive programs to lead to job creation.
Fisher and Peters refer to the work of Netzer, who pointed out that economic development incentives generally reduce the cost of capital rather than labor, yet believes it is unlikely that the reduction in the cost of capital will lead to employment increases. Instead, Netzer asserted, we should expect some substitution of capital for labor, given that "the new capital induced by cheap credit or state corporate tax credits is likely to be largely exempt from local property taxes, it may be no great success from a local standpoint if the labor intensity of a new plant is quite low (often the case with the more spectacular industrial development bond issues of past decades). So it is important to distinguish between capital and labor subsidies." (Fisher & Peters 1997).
The inconsistent findings regarding the effectiveness of incentives can also be seen in studies of enterprise zones. A majority of states have adopted enterprise zone legislation and several evaluations have been conducted to study the usefulness of this strategy. Because enterprise zones generally employ a number of incentives, they add to the body of literature assessing the value of incentives in promoting economic growth. In most cases, researchers found the benefits to be modest at best…..
A recent study of Louisville's enterprise zone (Lambert & Coomes 2001) further supports the argument that zones offer limited benefits. The study found little evidence of either economic or neighborhood revitalization benefits that could be attributed to the enterprise zone program.
Lambert and Coomes estimated that a minimum of $55 million in forgone tax revenue and fees and administrative costs was attributable to the program, but the number of jobs and employed residents within the zone actually fell even as the rest of the county experienced growth in both measures. While they admit being unable to determine precisely the costs and benefits of the enterprise zone program, they believe the benefits have been modest while the costs have been significant.
And finally is placing a coal gasification plant near the New Madrid Fault a really smart idea?