Faith in the wisdom of doling out lucrative tax breaks to privileged businesses wasn't daunted when Evergreen Solar Inc. announced in January that it was laying off more than 800 employees and shutting its "green energy" plant in Devens, Mass. -- a plant it had built with more than $30 million in state subsidies, and the promise of nearly $30 million more.
Similarly, Fidelity Investment's steadily shrinking commitment to Massachusetts hasn't endangered the targeted tax benefits that have saved mutual-fund companies an estimated $1.7 billion over the past 15 years. In March, Fidelity announced plans to close its offices in Marlborough and move most of the 1,100 jobs there out of state. Those tax benefits were originally adopted so the mutual-fund industry would keep enlarging its Massachusetts workforce. Yet the number of people Fidelity employs in Massachusetts is plunging -- from 13,000 workers in 2006 it will have fallen to only 7,300 by the end of next year.
There is no compelling justification for the commonwealth's $100-million-a-year subsidy for the film industry, much of which merely underwrites the salaries of rich Hollywood actors. "All the evidence shows that this is a very costly tax credit with minimal economic impact," the president of the Massachusetts Taxpayers Foundation, a business-oriented fiscal watchdog, testified in March. The few hundred new, mostly short-term, jobs attributable to the film subsidy in 2009, Department of Revenue data confirm, paid an average salary of $51,000. Each one cost the state more than $170,000.
Targeting tax credits to politically-wired special pleaders is terrible public policy. It reinforces the false idea that government is competent to decide which economic activities to nurture. State officials should not be trying to game the market for the benefit of industries it deems glamorous or cutting-edge or most likely to succeed. If they are persuaded that lower taxes would be good for the film industry -- or for solar energy or biotech or financial-services -- then it's a pretty good bet that lower tax rates would be good for business, period.
Tax-code favoritism breeds corruption. It substitutes the judgment of millions of consumers in an open market with those of political officials and the special interests that seek their favor. Video-game developers who see the largesse showered on certain industries can hardly be faulted for wanting some for themselves. "Wherever there is a trough," wrote the Russian poet Alexander Pushkin, "there you will find pigs."
But slopping pigs isn't the government's job. Neither is manipulating the tax code to advantage some businesses over others. If the Massachusetts video-game industry can't succeed on its own, it shouldn't go crying to Beacon Hill. No other industry should either.
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