Bad Bill of the Week: Central Planners Never Learn | Eastern North Carolina Now

    Publisher's note: This post, by Brian Balfour, was originally published in the Bad Bill of the Week, Budget & Taxes sections of Civitas's online edition.

    With the economic collapse of the last decade brought on largely due to the bursting of the housing bubble, does anybody still think it a good idea for government to encourage investments in "underserved" populations - investments that wouldn't otherwise be made without political pressure or incentives?

    Apparently, several North Carolina legislators think so.

    For this final installment of the Bad Bill of the Week series in 2015, we spotlight House Bill 305, New Market Jobs Act and Jumpstart our Startup Businesses Act.

    Sponsored by Reps. Rodney Moore (D-Mecklenburg), Edward Haynes (D-Forsyth), Charles Graham (D-Robeson) and Susi Hamilton (D-New Hanover), this bill re-introduces an idea that was previously dubbed a Bad Bill in 2012.

    The bill is modeled after federal legislation of a similar name, and its goal is to funnel business lending into poor communities. In short, the legislation would create a tax credit for investments in businesses located in areas deemed "low income." The credits can be awarded either to a company making the investment themselves, or a lending institution loaning to such a business.

    In other words, the New Market Jobs Act is designed to encourage investments that would be too risky without the granting of political privilege in the form of a tax credit. The goal, of course, is to encourage more investment in low-income areas, just as federal policies in the last decade encouraged mortgage lending to low-income areas. And we all know how that turned out.

    Why do politicians continue to try to tinker and micro-manage the economy? Why can't they simply establish an economic climate where all businesses play by the same rules and all enjoy low tax rates and minimal, sensible regulation?

    If businesses can't survive without government privileges like targeted tax credits, it is best they go out of business so their resources can be freed up for other uses. Propping up unsuccessful businesses by government privilege encourages economic stagnation and ties up scarce resources that could instead be used by more innovative and efficient firms.

    Several other states have also implemented their own "new market" tax credit schemes. Illinois experienced the completely predictable consequence of such a policy, as a Chicago-area company receiving nearly $8 million in state tax credits went bankrupt four months later. Indeed, testimony by an Oregon "tax fairness" advocacy group last year revealed that of the 10 states that have implemented such a tax credit scheme, three have already stopped funding them.

    Disappointingly, this bill also adds a section entitled: "Jump Start Our Business Start-Ups Act." This provision would pave the way for and make easier the process of "crowdfunding" of projects in NC. Adding this positive, free-market provision to a bad bill does not salvage the overall bill. Indeed, this just represents another example of legislators mixing separate, unrelated measures into the same bill that each should be introduced in its own legislation.

    Granting targeted tax credits to risky business investments is not only inherently unfair, it is a recipe for continued economic stagnation. Because it hands out government privileges to certain businesses at the exclusion of others, and includes an unrelated provision that should be included in separate legislation, House Bill 305 is this Week's Bad Bill of the Week.