New Jersey Governor Corzine Rightly Vetoes Tax Preferences for Media Companies
November 12, 2007
New Jersey, especially Gov. Corzine, has taken a lot of criticism from this blog, but on Sunday, sound tax policy prevailed at the governor’s mansion. From the Philadelphia Inquirer:
New Jersey Gov. Corzine conditionally vetoed a proposed tax break yesterday sought by major media companies and those looking to lure high-tech firms to the state, but the bill’s sponsor said he would look into overriding Corzine’s move.
Corzine said he was concerned that the cash-starved state government could not afford the tax break, which was supported by companies such as Cisco Systems Inc., the Walt Disney Co., and NBC Universal. He said he also wanted companies receiving a tax break to face job-creation requirements.
Under a conditional veto, New Jersey governors can propose amendments to make a bill acceptable. If the Legislature passes the bill with the recommended amendments, the measure is presented again to the governor for his signature.
Special tax provisions for specific companies or industries are not principles of sound tax policy. And they are not a free lunch, as Corzine states. They come at the expense of higher taxes on others or lower spending, or they create an unhealthy type of tax competition where states compete with one another to offer companies the biggest handout. This can lower the entire country’s economic welfare because they distort prices across industries and lead companies to locate for tax purposes as opposed to where it is most economically efficient.
In the end, it could even wind up being a classic case of rent-seeking leading to windfalls for politicians and government bureaucrats with little true economic profit being earned by the company.
As for Corzine’s support of a “job-creating requirement,” such policies are ridiculously stupid and feed into the public’s make-work bias that Caplan has shown. By that logic, if a company could have a machine produce an item twice as fast as a human can produce the item, Corzine would prefer to give the company a tax break if the company would hire the human to do it anyway despite the productivity loss, when the human could be working somewhere else in a relatively more productive manner.