Socialism seems to be garnering renewed interest. A millionaire socialist currently leads in some polling for the Democratic nomination in 2020, and the most outspoken new members of Congress unabashedly proclaim themselves democratic socialists.
Most readers will chuckle at the rise in popularity of a form of government that has condemned so many to impoverished misery. Short film clips of Bernie Sanders or Alexandria Ocasio-Cortez will surely feature prominently in GOP campaign ads, if not in the Democratic primary.
We need, however, to do more than simply laugh at their naïveté. Perhaps, those of us who believe in freedom need to ask ourselves some tough questions about ourselves. Instead of simply dismissing the democratic socialist, maybe we ought to ask a simple question: What part of their criticism of our market economy is right, and what should we do about it?
In truth, these are easy questions. Maybe the only thing the democratic socialists actually get right in their criticism of our market economy is the exaggerated influence of big business in tax policy and spending. Nowhere is this more apparent than in state and local tax incentives. We might even be at a turning point.
Wisconsin’s disastrous deal with Foxconn effectively taxed every family more than $1,500 to pay the company to locate in the state. Even before the deal fell apart, Gov. Scott Walker was ousted from office over the fiasco. Other states, including Indiana, are waging court battles to keep their proposals to Foxconn a secret.
The payments to Amazon promised by Virginia and New York were bad enough to cause mini-revolts in both states. Folks, Rep. Ocasio-Cortez was right to oppose the New York deal, and citizens of all stripes joined her dissent. She was wrong to wish Amazon away from her district. It is a fine business that can afford to pay for its own headquarters. Today states, including Indiana, are doing everything they can to keep their own proposals to Amazon a secret.
The Foxconn and Amazon deals stretch the conscience. Both companies took deals that amount to hundreds of thousands of dollars per new job. As astonishing as this is, it is nothing compared to Indiana’s new tax exemption for data centers.
Quietly, with zero fanfare, the Indiana legislature passed a 50-year tax exemption for data centers. The exemptions cover property and sales taxes for half a century. For several days, I’ve been scouring academic studies and reports to find evidence of anything like it in American history. I have found nothing even remotely as expansive. I even spoke with some well-known researchers at think tanks. The guy on the left, Greg LeRoy, called the plan “heinous,” and the guy on the right, Mike LaFaive, said it “strained credulity.”
By my calculations, the data center tax exemption would cost communities something more than $4 million per job. This is just property taxes for establishments that on average create just 30 jobs. The lost sales tax on equipment is perhaps $52 million, and I struggle to imagine what the lost taxes on electricity sales would be, since data centers use about 2 percent of all electricity in the U.S.
At the risk of piling on about the badness of this, the legislature decided to make this tax exemption retroactive to data centers built after 2012. This at least clarifies the intent of this legislation; it is a giveaway, and nothing more. There is simply no way to sugarcoat the fact that Indiana just passed the single worst tax incentive in American history.
To be fair, local governments rightfully ask for more flexibility, and this law does not require local governments to grant the exemptions. Still, I don’t think this gives them much flexibility. Moreover, this abandonment of fiscally conservative principles by the general assembly stuns the senses.
Socialism is a bad idea that failed the grand social experiments of the 20th and 21st centuries. Most Americans know this. However, the enduring wrongness of socialism does not mean socialists are wrong about everything. They are right to view the breathtakingly unequal treatment of large business as unprincipled failure of government. Democratic socialists are politically wise to note the deep political hypocrisy of these deals by erstwhile conservatives.
Michael J. Hicks is the director of the Center for Business and Economic Research and an associate professor of economics in the Miller College of Business at Ball State University. Send comments to [email protected].
