My friend Charley and I played hundreds of chess games when we were in high school. Both of us liked fast games, and we made our moves relatively quickly. But every once in awhile, Charley would pause after one of my moves, stare at the board and, in a mock-puzzled voice, express his astonishment, “And I ask myself — why?”
Often enough, this meant that I had just blundered, throwing away a piece or leaving my queen hanging. But Charley knew that appearances can be deceiving and that he’d have to watch out: Maybe he was about to fall into a devious and well-hidden trap.
I have something of Charley’s puzzlement when I look at the 2011 House Bill 1230, the Large Development Project Fund bill that South Dakota voters will have the opportunity to overturn in November. The measure takes 22 percent of the revenue generated by the contractor’s excise tax out of the general fund to create grants for companies launching large ($5 million minimum) construction projects in South Dakota. I look at this law and I ask myself, “Why?”
Is there something so important about construction grants that they should get permanent funding and an automatic exemption from legislative debates over how best to use scarce budget resources?
Are construction grants really a better option than, say, rolling back recent tuition increases, repairing the damage from last year’s floods, eliminating the sales tax on food — or maybe just lowering or eliminating the contractor’s excise tax altogether (as Al Waltman and Jim Lawler suggested years ago)?
And what kind of business needs these grants? Interest rates are at near-record lows, and there should be lots of private backers ready to fund a project that shows real promise of profitably. In a state that already has an attractive business climate (no corporate income tax, no personal income tax, weak or nonexistent unions, low prevailing wages), is there a need for additional incentives to lure businesses?
And if a business does need this kind of incentive, isn’t there a high probability that it’s the kind of enterprise that can’t make a profit on its own and won’t ever be weaned from dependence of government favors?
Don’t such grants subvert the disciplines that free markets impose and lead to the costly inefficiencies of crony capitalism? Isn’t it public funding and/or favoritism toward certain private business that leads to things like the Solyndra debacle and (more locally) the too-big-to-fail beef plant on Aberdeen's doorstep?
And what’s the justification of taxing all construction projects (even the smallest) to provide subsidies for only the biggest players in certain businesses?
Maybe there’s something I am not seeing. The House voted for the measure 50-18, the Senate, 28-4. The governor wants the bill. The South Dakota Chamber of Commerce and Industry wants the bill.
And maybe the Large Project Development Fund is the brilliant step toward economic development and job creation its backers claim. But it still looks to me like a blunder.
Art Marmorstein, Aberdeen, is a professor of history at NSU. He can be reached at firstname.lastname@example.org. The views are his and do not represent NSU.