From Kansas Policy Institute. Another article on this topic is For Wichita Chamber’s expert, no negatives to economic development incentives.
Opponents should attempt to persuade instead of simply dismiss
By James Franko
I’ve never understood why proponents of a position can hardly deign to engage people with whom they disagree. Easier to stamp the opposition as “nonsense” or claim that public demands for accountability are “over the top” than actually treat others’ arguments as having any merit. Shouldn’t opposition, skepticism, or honest question be greeted as an opportunity to engage and persuade instead of ignore?
The latest confirmation of this near-maxim followed an event KPI hosted on the “jobs fund” portion of the Wichita sales tax proposal. One of the speakers at our event, Jeff Finkle, also spoke to the Wichita Business Journal and dismissed any pushback to the proposal as “nonsense.” A sentiment Mr. Finkle reiterated at our event on Friday. Further in the Business Journal, Mr. Finkle said he couldn’t think of one study saying incentives don’t work.
Mr. Finkle said the following at our event when discussing the transparency and accountability aspects of the “jobs fund” plan: “[The transparency piece of the jobs fund plan] is off the chart. I actually think it’s a little over the top but if that’s what it takes to be acceptable in Wichita, that’s what you should do.” Emphasis added.
He doesn’t say that Wichita shouldn’t be transparent but his belief is quite clear — “it’s over the top.” This mirrors the thrust of his “nonsense” dismissal.
Is it really nonsense that Wichitans want to make sure they understand the proposal? Or see if it offers the returns they’ve been promised? Is it nonsense that many opponents of the proposal can cite multiple studies saying incentives are, at best, a mixed bag? Is it nonsense that others may just have a different opinion than Mr. Finkle? Instead of engaging them on the substance of their arguments, he brushes them aside with a “let them eat cake” assertiveness.
To Mr. Finkle’s contention that he “[doesn’t] know of one study that says incentives don’t work,” I’d simply say he, again, needs to treat the opposition with the same amount of respect he would certainly demand for himself. Readers shouldn’t take this as an endorsement of the links below (KPI isn’t taking a position on the sales tax proposal), but numerous studies do, in fact, exist that rather clearly show incentives are not working.
One such study focuses specifically on Kansas and our statewide PEAK program, a flagship incentive program in our state, and was presented on Friday by Nathan Jensen, Ph.D.; sharing a stage with Mr. Finkle. The findings of Dr. Jensen’s paper are quite clear, “The paper’s main finding is that, when comparing firms receiving PEAK incentives to a similar set of ‘control’ firms, PEAK incentives recipients are statistically not more likely to generate new jobs than similar firms not receiving incentives.” It is completely acceptable that Mr. Finkle is unpersuaded by the findings. But, the Wichita Eagle saw fit to report on the study in July with a headline of “Business incentive packages may do more harm than good, economist says” and quoted from an equally skeptical professor of urban and regional planning at the University of Iowa.
- A 2012 article in International Tax and Public Finance cites two European economists as saying, “…there is little empirical evidence on the effectiveness of tax incentives to attract investment.”
- On this side of the pond, a 2002 article focusing on Ohio manufacturing recipients of incentives in the Journal of Regional Science concludes, “Our analysis suggests that incentives do not substantially increase, and may even decrease slightly, the amount of employment change in the two years after an establishment launched an expansion. After controlling for other factors, we found that the effect of incentives on establishments that received incentives is a decrease of 10.5 jobs per establishment.”
This is certainly not a comprehensive literature review, but proof nevertheless that studies do indeed exist.
Mr. Finkle waved away these sorts of studies as “nicks” in specific incentive packages that do not amount to an actual refutation of the larger concept, again to the Business Journal. It isn’t that he disagrees with the findings, some in peer-reviewed academic journals, but that he refuses to acknowledge their very existence. Agree with the findings or not but it is impossible to argue that these studies do not exist.
We were happy to have one of the leading advocates for economic development incentives attend our event on Friday and make the case for why Wichitans should support the sales tax. We were equally happy to welcome other well-regarded experts covering differing aspects of what makes a local economy tick. However, reading Mr. Finkle’s remarks in the Business Journal and hearing his comments at our event, I have wonder if he views his trip to “flyover country” as more of an imposition than an opportunity to inform.