Tax “incentives” are special favors. Tax policy should not be rooted in giving special favors to some and not others. Rates should be low, yes, but they should apply equally to everyone who is engaged in an activity. When you lard up the state tax system with special favors for particular groups, you make it harder for entrepreneurs to evaluate the quality of your state’s institutions. You also effectively raise the price of doing business for those who are not so well-connected politically. Instead of moving to Kentucky, many entrepreneurs might move somewhere with a simpler system. Beth Musgrave provides today’s example:
A controversial Bible-themed amusement park received approval Thursday for up to $43 million in state tax incentives over a 10-year period.
The Kentucky Tourism Development Finance Authority, which oversees tax credits for tourism and film-related projects, unanimously approved the tax credit for the Ark Encounter project, which is scheduled to break ground in August outside Williamstown in Grant County.
In addition to the tax rebate, the state may spend an estimated $11 million to improve an interchange off I-75 near the 800-acre site in Northern Kentucky.
The other issue here is one of transparency. Musgrave reports that the project’s directors “would not disclose the major investors in the project but said that project backers are still raising money and hope to have all of the $150 million needed for initial construction by the end of June.”
We shouldn’t care about who these people are, but now that public money has been given so generously to them, it matters that we have no idea who will benefit from these special tax favors. Are they friends of Steve Beshear’s political aspirations? It shouldn’t matter, but now it does.