Jeff  Carter

In Crain’s Chicago Business, there was an article that said the $150M in tax breaks for Sears was money poorly spent.

“Rather than dole out that $150 million to one big company, how about this: Give $30,000 to 5,000 small companies to encourage them to locate in Illinois. By comparison, a successful Chicago-based accelerator — Excelerate Labs — funds 10 companies per year to the tune of $25,000.”

This is the wrong framework to look at tax breaks. Sears was going to leave the state. They would have taken 6,100 jobs with them. Those are taxpayers, not only on the state level but on the local level. Businesses like Sears create jobs slower than a successful start up might, but they offer a platform for start ups to build around. Viewpoints is a start up that is built around the Sears infrastructure.

It also assumes an economic fixed pie. Economies aren’t fixed. Like dark matter in space they can grow forever and in all directions if you don’t constrain them. It’s not a zero sum game. Also, the calculation of tax breaks related to the budget are always looked at with accounting numbers and not economic ones. Economic numbers are dynamic, and a tax break has been shown to have a 1:3 multiplier effect. For every one percent in the decrease of taxes, there is a corresponding 3% bump in GDP. Illinois ought to be cutting taxes to increase economic growth. Instead, they raised them.

Jeff Carter

Jeffrey Carter is an independent speculator. He has been trading since 1988. His blog site, Points and Figures was named by Minyanville as one of The 20 Most Influential Blogs in Financial Media.