Sunshine & subsidies

The Pennsylvania State System of Higher Education and the union representing PSSHE faculty have reached a tentative new contract. It comes a year after faculty went on strike protesting the lack of a deal. It was the first such strike in the 14-school system’s history.

 

But details of the deal are not being released – at least until union membership ratifies it and the State System’s board of governors approves the new contract.

 

Sorry, but the public pays a premium for this badly broken conglomeration and it has every right to details of this accord before it is signed, sealed and delivered.

 

The PSSHE’s problems – tanking enrollment (down nearly 2.4 percent from last year and 14.4 percent since 2010) and too many faculty, among two — will fester and grow worse “with more inter-institutional rancor and more calls for tax dollars without reforms,” noted Jake Haulk, president of the Allegheny Institute (in Policy Brief Vol. 17, No. 39).

 

And that should include making public tentative faculty contracts. After all, that public has every right to see what it is expected to underwrite before such contracts are in full force.

 

The Beaver County Times reports that during Royal Dutch Shell’s hour-long presentation this month to investors in London, a high-ranking officials touted the robustness of the petrochemical industry.

 

It has “strong market fundamentals, high growth rates and attractive returns,” John Abbott, Shell’s “downstream director” is reported to have said.

 

Global demand for petrochemicals is expected to grow by about 50 percent by the end of this decade, he also said.

 

And, as The Times reports, “In addition, Shell predicted in can nearly double its earnings in the chemical business to $3.5 billion (or) $4 billion by the end of the decade as (its) new petrochemical projects come online.”

 

Shell, of course, is building a massive ethane “cracker” plant in Beaver County’s Potter Township. It’s also planning new facilities in Louisiana and in China.

 

The bottom line is that Shell is a very wealthy corporation that, thanks to shale gas, stands to make uber-profits from these new facilities and grow by leaps and bounds.
So, why are taxpayers ponying up $1.6 billion in “incentives” for the Pennsylvania plant?

 

The very same question should be asked about Amazon. Cities from around the nation submitted their bids to the Seattle Internet retailing giant on Oct. 19, hoping to lure its second headquarters to their respective areas.

 

Pittsburgh was among those to submit bids, smitten by Amazon’s promise of $5 billion in investment and 50,000 jobs. That bid alone is reported to have cost between $300,000 and $400,000 to prepare.

 

While specifics of the local proposal are not known, The Philadelphia Inquirer reports that state officials have pledged more than $1 billion in unspecified incentives should Amazon locate in Pennsylvania.

 

But, like Shell, Amazon is no pauper organization. Revenue was $136 billion in 2016. It had operating income of $4.2 billion. Net income last year was $2.4 billion. Amazon had $83.4 billion in assets and total equity of $19.3 billion as well.

 

Simply put, it can afford its own capital expansion. And more directly put, the public has every right to know – now – what elected leaders have pledged to Amazon in the way of “incentives.”

 

Public officials cite “non-disclosure” agreements; such agreements should be barred in such dealings.

 

Which prompts this age-old question: What should government do to facilitate private-sector development? Get out of the way. How’s that done? Offer a regimen of fair and equitable taxation to all comers and a predictable regulatory climate that is not oppressively burdensome.

 

It’s that fundamental. Government has no warrant to constantly keep turning taxpayers into venture capitalists.

 

Colin McNickle is a senior fellow and media specialist at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

Weekend essay: The magic of Dad’s tea

“Would you care to sit with me
For a cup of English tea
Very twee, very me
Any sunny morning … “
 Paul McCartney, “English Tea” (2005)

 

It was the old man who introduced me to “English tea” in the 1970s. Long an instant coffee aficionado – for more than 20 years, a pot of Sanka simmered on the electric stove from morning until bedtime – for some unknown reason, he switched to tea.

 

But Dad’s use of the term “English tea” was most misleading. It wasn’t the traditional black tea mix of which the Brits remain so fond – Dad used either instant Nestea or whatever brand of tea bags could be had at the grocer – but how he “doctored” it.

 

As with his coffee, he tea was loaded with plenty of sugar and ample milk, “just the way the English like it,” he once told me. Never mind that it’s not necessarily the case, it sounded good to an impressionable teenager with a very Celtic name.

 

All that said, Dad’s “English tea” habit stuck. With good reason. For, to this day, there’s nothing better than a freshly brewed cup of Dad-doctored tea.

 

Yes, that sweet and creamy elixir has so many practical applications – from helping to plan a difficult day at dawn’s first light, to warming the hands (and the soul) working outside on a cool autumn afternoon, to helping trigger all those drunk-with-comfort, day-is-done feelings that, for some odd reason, won’t allow you to budge from the favorite chair in front of the mesmerizing fireplace.

 

Eighteenth-century British poet William Cowper once characterized tea as “cups that cheer but not inebriate.” He obviously knew not of what he wrote.

 

Colin McNickle is a senior fellow and media specialist at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

Call of the Amazon

There’s a curious line at the end of an Associated Press story regarding Pennsylvania’s ongoing budget impasse:

 

“Now, an analysis by Moody’s Analytics of metro areas that are good fits for Amazon’s huge second headquarters questioned whether Pennsylvania’s budget troubles will make it unwilling or unable to offer the generous financial incentives that Amazon will want.”

 

Really? As if handing a very (very) wealthy company a very (very) large bolus of corporate wealthfare should be some kind of “priority” in a budget-less commonwealth in which the governor and many legislators seeks to borrow and tax our way to prosperity, while others can’t seem to grasp the concept of belt-tightening, preferring instead to make ends meet with non-recurring revenues.

 

Business climate, indeed, is critical to attracting new investment to the Keystone State. But “business climate” should be defined by the relative paucity of government

 

interference in the form of taxes and regulations, not by how many taxpayer dollars can be given away.

 

Speaking of Gov. Tom Wolf’s plan to borrow in excess of $1.6 billion (and counting, one can only suppose) to “right” Pennsylvania’a badly listing budget ship, this, also from the AP:

 

“Public finance analysts generally regard borrowing to pay operating costs as bad fiscal practice and a last resort, and the practice of plugging deficits with one-time cash infusions over the last five years has played a prominent role in Pennsylvania’s credit rating plunging to the bottom rungs of state ratings.”

 

Sadly, Pennsylvania’s leaders appear to have no problem saddling future generations with ever more debt.

 

But, hey, Amazon will solve all this, right?

 

Business students at Penn’s Wharton business school, part of a team calling itself “Team Wharton Prime,” propose Amazon be given free land for its much ballyhooed “HQ2,” its second headquarters outside of Seattle. Oh, and also between $12.5 billion and $15 billion in tax credits to locate in Philadelphia.

 

It once was written that ignorance is a voluntary misfortune. How intellectually and economically tragic it is that so many so supposedly learned people so regularly tout alms for the moneyed interests that can, and have a moral responsibility to, pay their own way.

 

Pennsylvania, by the way, has an unflattering history of tracking/proving that tax incentives live up to their rah-rah-sis-boom-bah billing. And, in some cases, the very veracity of the commonwealth’s claims of “public benefits” has come into question.
As Pennlive.com’s Wallace McKelvey reminded in an Oct. 9 dispatch, “A 2010 report by the Legislative Budget and Finance Committee found little oversight to ensure that the jobs tax credit recipients promise actually materialize.”

 

Poor record-keeping was cited. But also cited were confidentiality requirements that shield hiring and tax payment information from public scrutiny, McKelvey wrote.
Now there’s a sound public policy: Offering tax breaks for possibly illusory benefits that are either difficult to verify or can’t be verified.

 

Sweet deal, eh?

 

Perhaps on this Amazon is banking?

 

Speaking of unflattering, that’s the portrait Carnegie Mellon University humanities professor Tim Haggerty paints of the process being used to put together Pittsburgh’s proposal, due Oct. 19, to secure Amazon’s HQ2.

 

In fact, in an Oct. 8 commentary in the Post-Gazette, he likened the secretive and limited-time process to “railroading … a great way for a corporation to see how much control it can exert over a local government.”

 

Concluded the former urban planner, “(I)f you’re frustrated by the lack of input into the process now, just wait until we’re essentially a one-company town. New and innovative really doesn’t mean fair or livable.”

 

Ouch.

 

Citing a litany of redevelopment “fashion cycles,” Haggerty says “popular (economic) renewal strategies have fallen in and out of favor over time as intrinsic costs and benefits reveal themselves.”

 

That would be, generally, costs that are too high and hardly an effective allocation of scarce resources – taxpayer dollars – and benefits that always, always, fall short of the pols’ promises of fantastical “multiplier effects” that will deliver the renaissance of all renaissances.

 

Colin McNickle is a senior fellow and media specialist at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

 

No reassessments bring stability? It’s a shibboleth

Elected officials say the darnedest things. Witness Allegheny County Chief Executive Rich Fitzgerald’s defense of the indefensible in his Oct. 11 budget address to County Council.

 

The ACE touted a budget that holds the line on taxes but increases spending. That’s possible, Fitzgerald said, because of “robust construction” in the county and higher drink and sales tax revenue.

 

But then he noted how Allegheny County does not conduct annual property reassessments. “I think it gives folks the confidence there’s stability in our real estate taxing system.”

 

Sorry, but no.

 

In actuality, a lack of regular assessments creates uncertainty and instability in the real estate taxing system.

 

And let’s not forget gross inequities in which some higher-end properties are assessed lower than they should be and some lower-end properties are assessed higher than they should be. Those of lesser means subsidize those of greater means.

 

Worse, and as Allegheny Institute scholars detailed (in Policy Brief Vol. 17, No. 11) those growing inequities could result in a new, and expensive, round of court challenges.

 

“As the years go by and property values increase at very uneven rates in different areas of the county, the problem created by inequitable assessments that led to court-ordered reassessments in the past inevitably arises again,” researchers Eric Montarti and Jake Haulk noted in March.

 

While the ACE often has declined to push for a reassessment (the last one was five years ago, court-ordered, as was the one prior), claiming that property owners will be saddled with much higher tax bills, an institute op-ed, also in March, characterized that plaint as “a red herring fished in the deep waters of politics.”

 

To wit, a few years back, during a meeting with editors and reporters at the Tribune-Review (where, at the time, I served as director of editorial pages), Fitzgerald laughed off a question if a reassessment might be forthcoming. The clear implication was, in his intonations, that it would be political suicide.

 

But, and simply put, Montarti and Haulk remind that windfall limitations imposed by the commonwealth would prevent the kind of massive tax-increase Armageddon that pols typically claim comes with property reassessments.

 

“Only properties with market values that have increased faster than the average rate will get hit with substantially higher taxes,” they noted. And some properties with slow or no increases in value will see taxes fall post-reassessment.

 

All misguided local anti-reassessment stratagems aside, the state Legislature has been a recidivist hand-sitter on the issue. And that’s a dubious public policy considering the current system most assuredly is a violation of Article VIII, Section 1, of the Pennsylvania Constitution:

 

“All taxes shall be uniform, upon the same class of subject, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws.”

 

Almost all states require regular assessments. And as Montarti and Haulk further noted last winter, those states have far less controversy and upheaval over assessments than in Pennsylvania, in general, and in Allegheny County, in particular.

 

Back to Fitzgerald’s statement. A lack of annual, or regular, reassessments “gives folks the confidence there’s stability in our real estate taxing system,” he says.

 

Perhaps for the ignorant. Perhaps for the poli-connected. Perhaps for those who pay less than they should for their real estate taxes.

 

But for those paying more than they should — and for taxpayers at large who will have to foot the bill for the next legal challenge to rectify such an inequitble system and the court-imposed remedy that is sure to follow – such “confidence” and “stability” is a shibboleth, a most vile economics lie.

 

Colin McNickle is a senior fellow and media specialist at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

Weekend essay: Weather happens

The largest tomato of the year, the best-tasting Brandywine of the bunch, has been picked — in mid-October. That’s a first.

 

Celery, multiple stalks taken two months ago, will be harvestable again in a matter of weeks. The ribs will be smaller but it’s still a remarkable thing when one considers no row covers had to be employed.

 

The lettuce, planted for late fall/early winter consumption, has bolted; a new crop must be sown if holiday greens are to be a reality.

 

Windows? More closed than opened. Not to hold in the heat, mind you, but to hold in the cool conditioned air to ward off the humidity.

 

There’s been nary a dent in the cordwood, stacked at the ready and under cover out back. It’s only been cool enough this fall for two fires of any substance, one of cherry and another of Irish turf.

 

The leaves are falling — but more out of fatigue than it being fall. Their hues are dull brown, not the usual autumnal rainbow. Leaf piles, however, are short-lived. For their dryness begets dust as cars crush them on the street and children gather them in yards to frolic. Piles instantly are reduced to pieces.

 

Porch and deck plants remain in place. The canna lily and hibiscus just keep blooming and blooming, the former having produced three times as many seeds this year.

 

And yet to be stored are the porch and deck furniture — on which all remain the perfect place to take in an oddly lingering summer and, just perhaps, to catch the first indications of an overdue fall. The tardy bell has been ringing.

 

Folklore has it that a warm October leads to a cold and snowy February. Some forecasts already have been calling for exactly that.

 

Another folktale has it that a full moon in October without frost means there will be no frost until November’s full moon. That will be Nov. 4 this year. There was not one speck of frost on the pumpkin with this month’s full moon.

 

We will lament mightily what very well could be a summer turning to winter with no real fall. And come that cold and snowy February, we’ll be pining for a March that more resembles May.

 

“Climate change!” more than a few cluck-cluckers have been shouting, using the phrase as the expected pejorative.

 

“Weather happens,” more than a few old hands calmly retort, using that phrase as matter of factly as old hands, well-worn and far wiser, have been using it for aeons.

 

Colin McNickle is a senior fellow and media specialist at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

 

Stare decisis? What stare decisis in Pa. school funding case?

It certainly is more than worth noting the anomaly that is September’s Pennsylvania’s Supreme Court ruling regarding the latest challenge to the constitutionality of the commonwealth’s public school funding methodology.

 

The state’s highest court held that the matter indeed is justiciable – and not necessarily the sole purview of the General Assembly – and sent the case back to the Commonwealth Court.

 

That, to at least allow the plaintiffs in the latest challenge – Delaware County’s William Penn School District, et al. – to attempt to make their case.

 

But at its base, the Supreme Court’s ruling should be considered an outlier. After all, for nearly 40 years, trial and appeals courts in Penn’s Wood have ruled the exact opposite, including the state Supreme Court.

 

A history of the funding debate by the Education Law Center, a supporter of the latest legal challenge, is most instructive.

 

It was in 1979’s Danson v. Casey that the high court found the matter to be non-justiciable – that is, the matter being the sole purview of the legislative branch. The plaintiff alleged the school funding system to be unconstitutional because it allocated insufficient money to “provide for the maintenance and support of a thorough and efficient system of public education to serve the needs of the commonwealth.”

 

Twice again, in 1998, the courts refused to become legislators.

 

In Pennsylvania Association of Rural and Small Schools v.Ridge, a trial court dismissed claims of “adequacy” and “equity” as non-justiciable. And in Marrero v. Commonwealth, an appellate court found the same regarding claims of “inadequate funding” and “inadequate education.”

 

But in the William Penn case, the current Supreme Court, ruling 5-2, last month curiously included this in its rationale:

 

“It is instructive that so many other states have found claims under their respective (constitutional) education clauses to be justiciable, either explicitly in the face of political question challenges, or implicitly by analyzing at length the merits of the challenges at issue.”

 

But we’re not “so many other states.” We’re Pennsylvania. And never mind four decades of legal precedents by Keystone State courts. So much for stare decisis, the common law doctrine that court decisions should be guided by precedent.

 

The can of worms opened – should the plaintiffs prevail on rehearing in Commonwealth Court (and even high court jurists view that as a tall wall to scale) – the matter could end up in a seemingly never-ending swamp of litigation.

 

That, tragically, could result in a further violation of the sacrosanct separation of powers, not to mention schools run not by the people but by the courts.

 

Nearly six years after Pittsburgh’s old Civic Arena was demolished, redevelopment of the 28-acre site is nothing to brag about.

 

Oh, some public infrastructure is in place. But any real progress is bogged down by this latest escapade in central planning.

 

The Penguins were handed exclusive development rights in a sweetheart government deal. Yet, the franchise, claiming environmental problems at the site, this month is expected to file for yet another extension to get things rolling, the Tribune-Review reports.

 

Dare it be said – again: Had these Lower Hill District tracts been offered to the highest bidders, development would have been well underway long ago.

 

And dare it be said – again: The piecemeal development of this large site surely would have been more organic and sustainable (i.e. diverse, eclectic and market-based) than any market-perverting, government-overlorded central plan.

 

Colin McNickle is a senior fellow and media specialist at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

Let the games end

As poison pills go this would be doozy: After the Republican-led Pennsylvania Legislature failed yet again to come up with a tax, tax, tax revenue plan to match its spend, spend, spend budget plan, Democrat Gov. Tom Wolf took the gloves off last week.

 

By Jove, the governor declared, he was mad as heck about the impasse and would do the most prudent thing he could do in such a situation – borrow money. Ahem.

 

There’s certainly a pattern here: No one has the gumption to do what’s right – namely, cut, cut, cut spending.

 

So, whence did Wolf find a lender? Why, in the state monopoly that is the Liquor Control Board. He plans to secure a $1.25 billion bond using income from the LCB – a “securitization of future transfers” from the LCB to the state’s General Fund, amortized over 20 years.

 

Some question the legality of the move. But House Majority Leader Dave Reed told Cityandstatepa.com that Wolf “apparently has the legal authority to do this.” Reed says legislators learned of the proposal through the media.

 

The governor says he has the backing of LCB boss Tim Holden. Holden, a Wolf appointee, and two board members told the website that the full board has not discussed such a move but, as the website put it, “they understand the appeal of monetizing future transfers to ameliorate the commonwealth’s difficult budget situation.”

 

But as reporter Steve Esack of The Morning Call of Allentown notes, such a loan likely would scuttle any near-term efforts to privatize the LCB, a Prohibition-era anachronism:
“The state could not sell the LCB if the 20-year bond is attached to it,” he theorizes.
Unless, that is, any buyer covers the $1.2 billion. Double Ahem.

 

But why go through such bureaucratic machinations? It would be far more profitable, if not easier, for the commonwealth to end its monopoly, totally, on wine and liquor sales and sell off the operation once for all.

 

When is a tax a bad tax? When it’s not the tax you’re proposing, one that you seek to protect, apparently.

 

Allegheny County, City of Pittsburgh and tourism officials were variously stunned, disappointed and outraged when legislators in Harrisburg, without consultation, proposed a 5 percentage point increase in the hotel tax paid by patrons in Pittsburgh and Philadelphia.

 

The proposal, which went down in flames last week, would have led to a 19 percent tax on Pittsburgh hotel rooms and 20.5 percent for Philly hotel rooms. That combination of state and local taxes would have been among the highest rates in the nation.

 

Indeed, such an onerous impost would play a role in customers, be it individual tourists or conference planners, deciding not to come the city or county.

 

But, and in the perverted world of taxing ourselves to prosperity, local officials appeared to be just as worried that such a state tax-hiking effort would hurt a local state tax-hiking effort.

 

You might recall that those same local officials already have on the table a proposal to raise the hotel tax by 1.25 percentage points. That, to generate about $6 million annually to fund, among other things, a new Pittsburgh Sports Commission.

 

The commission would be charged with helping to attract major sporting events and to make sure facilities that might host such events are up to competitive snuff. There’s even been talk of using some of the money to fund improvements at Heinz Field, PNC Park and PPG Paints Arena.

 

Good grief. Yet further proof that taxpayer abuse begets taxpayer abuse. Another bureaucracy to siphon off more money from private pockets. It truly is what “progressivism” is all about.

 

Colin McNickle is a senior fellow and media specialist at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

Weekend essay: Oscar gets a snake

It’s not an uncommon sight on Jones Mountain to see Oscar the Cat crossing the road with his catch of the day. Nobody’s talking scrod here, mind you, and sometimes “catch” is plural.

After all, there’s such a wealth of “game” in these Appalachian foothills of this Northern West Virginia enclave that the word “smorgasbord” comes to mind.

Most of the time, Oscar, a 3-year-old orange Tabby, deposits his “gifts” on a broad front-porch slab of concrete next to a pair of oft-used white Cracker Barrel rocking chairs. Sometimes he takes his deposits directly to the front door.

Wrens, finches and field mice are common menu items. But Oscar, who prefers to take his drinking water from a stainless steel cup next to a bathroom sink, is not wont to shy away from bigger game.

Evidence the number of blue jays, clearly no shrinking violets, that Oscar has delivered. Or rabbits, certainly no slouches in the fleeing department.

These are not necessarily “clean kills,” you should know. In fact, if you didn’t know better, you might think some of the mountain kids had performed a Satanic ritual on the spot.

A few weekends ago, however, Oscar, prone to hiss and swat at your leg if your petting ends prematurely, tried a new delicacy.

On a pristine Jones Mountain day, Oscar the Cat came trotting across the road with a snake. A very much alive snake. Oh, it might have just been a garter snake but it was in excess of a foot long. And just as a certain hoe-toting scrivener approached Oscar to de-snake him, the snake struck, biting a startled Oscar on his left shoulder.

Oscar dropped the snake; the hoe-toter dispatched with its head. Oscar appeared no worse for the retaliation but skedaddled into the woods, likely seeking a repair kit to mend his reputation and to plot his return as the Hunter King of Jones Mountain.

Colin McNickle is a senior fellow and media specialist at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

Troubling juxtapositions

A few curious and troubling juxtapositions to consider:

 

The Pittsburgh Promise was established 11 years ago this December. The college scholarship program was, as the Post-Gazette recounts, “touted as a way to boost the performance of the city schools, help students achieve their dreams, attract families to Pittsburgh and keep those already here.”

 

But as the Allegheny Institute has documented time and time again, it has done little to boost school performance or attract families to the city. In fact, Pittsburgh Public Schools are a systemic failure. And qualification criteria for the scholarships – primarily low average grades –debase the word “scholarship.”

 

It was three years ago this month, in a Tribune-Review op-ed, that think tank president Jake Haulk couldn’t have been more succinct in what ails the Pittsburgh Promise:

 

“(G)iving scholarships to so many who by almost every measure are not prepared to do college-level work leads to high failure and dropout rates, and that means large amounts of Promise funds are being wasted.”

 

The P-G recently offered that “The Pittsburgh Promise has become a symbol of a progressive city.”

 

Well, yes it has. But that’s hardly a positive thing.

 

The Milwaukee Journal-Sentinel reports that OneJet will establish a second operating base at Milwaukee’s Mitchell International Airport. But it’s unclear whether taxpayers there, as they did in Pittsburgh, paid a premium for the “privilege.”

 

You may recall that OneJet received county and state grants and loans — better known as taxpayer money – totaling $3 million. The Tribune-Review quoted Allegheny County Airport Authority CEO Christina Cassotis as saying the “incentive offer” was created to entice OneJet “to base (its) operations (at Pittsburgh International Airport) and to grow here faster that (it) would in any other market.”

 

Now, OneJet is establishing another base in Milwaukee. But it says “Pittsburgh remains by far our largest operating base.”

 

The Journal-Sentinel says “an investment from a group led by former Midwest Airlines CEO Timothy Hoeksema” helped seal the Milwaukee deal. But it’s unclear if any taxpayer dollars were thrown into the kitty.

 

If not, that certainly raises questions about the use of public dollars in Pittsburgh in an attempt to make OneJet a “winner.”

 

Never mind that it’s clearly a violation of Article VIII, Section 8, of the Pennsylvania Constitution which prohibits the lending of the commonwealth’s credit to any individual, company corporation of association.

 

The Associated Press reports that Pennsylvania’s hotel tax rate would nearly double and Philadelphia and Pittsburgh would have the nation’s two highest combined state and city hotel taxes under a state House proposal to help close the Keystone State’s projected $2.2 billion budget hole.

 

The hotel tax in Pittsburgh would rise to an astonishing 19 percent; Philadelphia’s would be even higher at 20.5 percent.

 

The AP says the hotel tax would be buried in hundreds of pages of legislation and was negotiated in secret. Of course.

 

At least one lawmaker pooh-poohed any negatives from such tax hikes – a 5 percentage point hike for Pennsylvania’s two largest cities.

 

“I’m sure tourists will continue to come to Pennsylvania, and we need revenue,” said House Minority Leader Frank Dermody, an Allegheny County Democrat.

 

Taxes have no consequences? Hardly. It remains axiomatic – the more you tax something, the less you get of it.

 

Colin McNickle is a senior fellow and media specialist at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).

 

 

The odoriferous side of Amazon’s HQ2

Does no one smell a rat here?”

 

That’s what Andrew Wilson, a resident fellow and senior writer at the Show-Me Institute in St. Louis, asks about Amazon’s bid to shake loose up to $1 billion in public “incentives” to build a second headquarters outside of Seattle.

 

The Internet retailing giant says “HQ2,” as it is being called, would mean a $5 billion investment in the “winning” locale and upwards of 50,000 high-paying jobs. States, regions and cities all over the country, including Greater Pittsburgh, have been falling all over themselves to craft bids (due Oct. 19) to win this “prize.”

 

As Wilson reminds:

 

“In any auction, the winning bidder may pay more for something than it is worth. That is especially the case in this kind of auction – in which government entities compete with one another in offering tax breaks to a rent-seeking corporation (i.e., one looking for public assistance for private gain) that is trying to get as much as it possibly can from government.”

 

Furthermore, Wilson says:

 

“The fatal flaw here is the deeply ingrained habit of regional economic development agencies and other government entities of assuming (falsely) that a public investment of X dollars will yield about 2X in indirect benefits – in addition to the job creation and economic growth that come from the investment made by the rent-seeking company.”

 

Sounds eerily familiar, does it not? City, county and state officials in Pennsylvania are predicting nothing short of economic nirvana, thanks to Amazon. We saw the same claims from those pushing for new sports stadiums two decades ago.

 

But citing Joseph Haslag, the Show-Me Institute’s chief economist, Wilson reminds that such “multiplier effects,” as they are known, are wildly overblown.

 

“There is no economic evidence to support a multiplier of more that 1.0 ($1 of benefit for one dollar spent).

 

“In fact, there is considerable evidence that government investments earn well-below average returns,” Wilson says. “Rather than add to economic growth, government investment all too often subtracts from it – in directing scarce resources to sub-optimal uses.”

 

And that’s no “investment” at all. It is, however, corporate wealthfare.

 

As the St. Louis think tank notes – and as the Allegheny Institute for Public Policy also has been stressing for the past two decades – the far better (if not best) bet is to stop raiding taxpayers’ pockets and allow the marketplace to determine what should be produced and whom should produce it.

 

Wryly notes Wilson: “Somehow Amazon stopped short of asking cities and states to pick up a quarter of the annual payroll at its second headquarters.”

 

Pennsylvania, Allegheny County and City of Pittsburgh taxpayers should take heed. When officials claim landing Amazon’s second headquarters is a be-all and end-all, that’s typically a good sign that it will be nothing more than the proverbial pig in a poke.

 

Colin McNickle is a senior fellow and media specialist at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).