Keeping government from becoming a ‘kingmaker'
Governor Jan Brewer was right to veto the legislature's attempt to carve out special tax privileges for certain businesses.
In her veto message, the governor cited many of the reasons the Goldwater Institute suggested for opposing the legislation. The bill had "potential to favor new businesses over those who have weathered the economic storms with us," she wrote, and would require new bureaucracy to verify company eligibility.
The governor noted that if the bill passed, the new Commerce Authority—the entity that will replace the state's Department of Commerce—would become the gatekeeper to decide which companies would qualify for the special tax breaks. She then concluded that could risk making "the Authority the ultimate judge and jury for every local economic development project," and warned that the Authority should not become a "business kingmaker" for the state.
Even though SB 1041 will not become law, the Commerce Authority could still morph into a kingmaker, and one that the legislature and taxpayers must be vigilant in policing. When a government agency can decide which businesses to favor in any form—whether by special treatment through the tax code or selective exemption from certain regulations—it opens the door for, at best, the misguided pursuit of investment fads or, at worst, the potential for corruption and abuse.
While SB 1041 was problematic, allowing the Commerce Authority to become an economic kingmaker would be far worse. Making sure the Commerce Authority doesn't become a one-stop shop for corporate welfare must be an ongoing task by taxpayers and government watchdog groups.
Stephen Slivinski is senior economist at the Goldwater Institute.