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AUSTIN – Today, the U.S. Bureau of Labor Statistics released state-level labor market data for January 2018. Texas employers created 16,000 net nonfarm jobs in January, bringing the total to 240,500 jobs created in the last twelve months. The Texas Public Policy Foundation’s director of the Center for Economic Prosperity and senior economist Dr. Vance Ginn issued the following statement:
“Texans continue to prosper from a model of limited government in the Lone Star State that supports more job creation,” said Dr. Ginn. “With a focus on preserving liberty, government can help Texans enjoy more opportunity both economically and personally."
The state’s unemployment rate of 4 percent has now been at or below 5 percent for 43 straight months.
This originally appeared on the WND website.
President Trump’s embrace of new tariffs on steel and aluminum imports is largely believed to be behind the exit of his top economic adviser, and one free-market advocate is concerned that it could hurt American consumers and stunt the nation’s economic growth spurt.
Last week, during a meeting with executives from America’s leading steel and aluminum manufacturers, President Trump announced his new policy.
“We’ll be imposing tariffs on steel imports and tariffs on aluminum imports. Pretty much all of you will be immediately expanding if we give you that level playing field, if we give you that help,” said Trump in announcing 25 percent tariffs on steel imports and a 10 percent surcharge on foreign aluminum.
The policy comes as little surprise, since Trump routinely condemned what he characterized as terrible trade policies with the likes of China and Japan and vowed to revive American manufacturing by addressing America’s trade posture.
However, Texas Public Policy Foundation senior economist Vance Ginn believes tariffs are the wrong policy for Trump to pursue.
“I think this would be bad for Americans overall and reduce our economic potential over time, which had been boosted by the tax cuts last year and the regulatory reforms that were made,” Ginn told WND and Radio America. “I’d rather see those sorts of things boosted instead of tariffs and trade practices such as this.”
Ginn said the simple fact is that charging more for imports means higher prices for all of us.
“If you raise the cost of doing business, that hurts business. And it hurts American consumers,” he said. “Whenever you look at raising steel prices and aluminum prices, those are in the cars that we drive and the buildings where we work and in many other aspects of capital throughout our economy.”
He also said Americans were reminded just last decade in the George W. Bush administration that steel tariffs don’t necessarily get the intended results.
“Some estimates show that cost us about 200,000 jobs,” Ginn said. “I would hate to see more Americans not have a job when we’ve had an expanding economy.”
Commerce Secretary Wilbur Ross estimates that the steel tariffs would result in a bump of one-half of one percent to three-quarters of one percent, an average of about $700. He said the difference is “trivial.”
Ginn said that approach badly undermines the administration’s defense of the tax cuts.
“If $1,000 is just crumbs, according to Nancy Pelosi, but a big deal according to those in favor of the tax cuts, $700 is also a big deal,” he said. “That takes away a lot of the potential from those bonuses that they had before to [add income].”
But with significant trade deficits and China dumping steel into this country in violation of World Trade Organization protocols, the U.S. stands at a tactical disadvantage.
Ginn said that doesn’t explain why the tariffs apply to everyone.
“The proposal so far would be a global tariff on steel and aluminum,” he said. “It wouldn’t just hit China. So if there are those issues with China, let’s deal with those, not necessarily make it for everyone to pay these higher costs.”
Ginn also said the effort to reduce America’s trade deficits starts with a tough look in the mirror.
“Let’s look at what we’re doing here at home that’s also maybe raising the cost of living and raising the cost of doing business such that China and other countries are having a competitive advantage in the global market,” he said.
“Let’s look at the cost of unions and what they’re doing to the cost of labor over time. Let’s look at our minimum wage and what that’s doing over time. Retirement pensions. There are a number of factors that are raising the cost here that are putting us at a disadvantage compared to other countries.”
Ginn believes America’s position on the global trading stage is already on the upswing, thanks to the tax-reform bill.
“That helps to reduce the cost of doing business,” he said. “It allows us to be more competitive on a global playing field. I think we should look at more of those things, along with regulatory reforms.”
According to Ginn, the way to help an economy flourish is not to add more complications but to remove as many as possible. He said it’s led to a booming economy in Texas.
“The ability for us to focus on freedom and free markets has allowed us to be a powerhouse,” Ginn said. “As an independent nation, we would be the 10th largest economy in the world and continue to create a lot of jobs. In fact, over the last decade, we created 26 percent of all new jobs that were added in the United States.”
President Trump’s negotiating tactics often show him throwing out an idea, watching his critics set their hair on fire, and then finding common ground with a less severe approach. Ginn suspects that is Trump’s approach here, as well as an effort to put the heat on officials renegotiating the North American Free Trade Agreement, or NAFTA.
“He’s even talked to the Mexicans and the Canadians and said, ‘Look, if we don’t get something done with NAFTA, then I’m definitely going through with these tariffs.’ That puts pressure on the NAFTA renegotiation process as well,” he said. “I’m hopeful this is not where we’ll be at the end of the day.”
Ginn contends NAFTA could be much better but it’s not as destructive to the U.S. economy as its critics suggest. He says free trade ought to be the ultimate goal.
“What would be a perfect trade agreement?” he asked. “It would be no trade barriers between the countries that are involved. Instead, we have a 1,700-page trade agreement with NAFTA.
“So what does that do? That picks winners and losers throughout the whole economy. There’s a lot of ways to renegotiate to make this more of a free-trade agreement. I’m just a little concerned that’s not where we’re going to go if we start picking out even more winners and losers in the process.”
This commentary was originally featured in the Odessa American on March 8, 2018.
Imagine: You own a business. You love what you do, the opportunity to employ people, and satisfying customers. But the cost of doing business is escalating as local property taxes increase.
Down the road, a large corporation started construction of a new building. They considered other locations before choosing your community. That corporation received a tax abatement with the school district. That means for 10 years, they will pay only a small portion of taxes due without abatement. Meanwhile, your business does not benefit from a tax abatement, and you will likely pay higher property taxes every year.
Even worse, that new corporation may compete directly or indirectly with your business.
If that sounds frustrating, or outright unfair, it should. Yet, it happens often using Chapter 313 of the Texas Tax Code.
Actually, it could soon happen in your backyard.
The Ector County Independent School District Board of Trustees received a request by 174 Power Global Corporation to conduct a public hearing on an application under that chapter, also known as the Texas Economic Development Act. The company seeks a 10-year, 100 percent tax abatement for a solar energy project that may bring a $50 million investment and create two full-time jobs, according to documents submitted to the school district.
Tax abatements like this are nothing new and are justified under the guise of economic development.
The Texas Comptroller reports that 53 percent of these tax abatements in 2016 were for renewable energy. Renewable energy projects received 25 percent of the total estimated gross tax benefits but represented only 11 percent of jobs committed for creation.
Supporters argue tax abatements increase tax revenue and foster job creation through new investment by businesses. However, these tax abatements exemplify why we should pay close attention to not only effects that are seen, but also those that are unseen.
If these new businesses create permanent jobs, demand for basic government services may grow. If the businesses responsible for this demand pay lower taxes than existing businesses, current businesses – and individual taxpayers – foot the bill.
In addition, the exempted property value under such an agreement is excluded from school finance formulas that determine much of the funding for school districts. The Legislature generally covers declines in a district’s revenue, thereby forcing taxpayers statewide to pay more for certain districts that provide tax breaks to favored businesses.
School districts can also negotiate “supplemental payments” from businesses applying for an abatement. These payments are paid outside the school finance system.
Hence, school districts are incentivized to accept all tax abatement applications because they can replace lost local revenues with state dollars and can get supplemental payments.
And what do communities gain by offering such tax incentives? It’s probably not as much as they may think.
A recent study by Dr. Nathan Jensen of the University of Texas at Austin examined the bargaining power between school districts and businesses with plans to expand or relocate in Texas. Using supplemental payments as a percentage of the preferential tax treatment businesses were ready to give up, and a survey of economic development professionals, he concluded that around 85 percent of these businesses would have come without an abatement.
A bill passed last session tried to remedy another problem resulting from such tax abatements.
The legislation modified Chapter 313 to prevent wind energy companies from receiving tax abatements for wind turbines built within 25 nautical miles of military aviation bases. Offering preferential tax treatments in areas close to these bases often encouraged businesses, including wind energy businesses, to locate there despite challenges for flight operations, such as radar interference.
These costs to taxpayers highlight why government, including your school district, shouldn’t be in the business of economic development. Government should preserve liberty, not favor a few, politically connected businesses at the expense of all other taxpayers
Texas should repeal tax abatements like these and other corporate welfare programs while focusing on reducing government spending and tax burdens so everyone has more opportunity to prosper.
Ph.D. Economist at the Texas Public Policy Foundation. Blog posts are publications by the author.