Economic development, incentives via the government, and economic growth, based on free market principles, should not be confused.

Well-meaning public officials, government employees, community business owners and executives, and chamber of commerce cheerleaders have the best of intentions when they propose ideas for economic development. I believe they are genuinely trying to help. I just wish they would stop. When we confuse economic development with economic growth, we make big mistakes in public finance. These two concepts may sound similar but they are, in fact, opposites. An emphasis on one or the other leads to different results.

Those of us interested in seeing economic growth advocate for broad public policies like lower taxes, a reduction of the regulatory burden on businesses, the elimination of double taxation on investments and savings, and a reliable and predictable legal and regulatory environment. In stark contrast, proponents of economic development argue for subsidies, tax abatements, and regulatory relief for specific businesses or industry types in particular regions. The latter believe the economy can be directed by government involvement; the former believe the economy will produce a better outcome when we leave it to the entrepreneurs and consumers to determine the direction.

For those of us with a belief in the durable power of free-markets, the choice is easy. We know, thanks to Adam Smith and 242 years of data, wealth is created by the free exchange between producers and consumers. If we leave markets free and allow the natural incentive of profit-seeking to work, without government trying to influence, direct, guide, orchestrate, manage or nudge, the states maximize their economic growth. Such growth is what drives long-term employment and increased prosperity. When we replace the decisions of entrepreneurs, investors, and consumers in the private market with decisions of politicians, government officials and development boards, we significantly lower the odds of achieving economic growth.

Economic development policy really means the state picking the winners and losers by employing direct subsidies and tax breaks to attract or promote specific businesses or industries. An authentic effort to grow our economy would not focus on giving targeted companies the assistance and resources without providing those to all companies and industries. It is not fair to the current companies in Mississippi, who built their businesses without government help, to find themselves competing with companies subsidized by taxpayers. For too long, Mississippi has followed a policy that supposes “economic development” can be a meaningful driver of economic well-being in the state. It cannot. That policy is a losing one.

The evidence produced from analysis points convincingly to the conclusion that these targeted incentives do not produce long-term benefits in excess of their costs. In many cases, the cost-per-job is extraordinarily high. While some high-profile companies and their political allies may be better off, non-beneficiary companies may lose workers or experience wage increases, or both, and the state’s economic activity as a whole slows.

When political favor seeking is emphasized like this, it thwarts the private sector and tips the scales in favor of those companies and individuals with access to political relationships. It sends a message to the private sector that it should not focus on consumer-oriented actions, like product/service innovation or marketing, and focus resources instead on lobbying, legal representation, and elections. That’s not a recipe for sustained economic growth.

While economic development incentives, like those practiced by the Mississippi Development Authority, may lead to the creation of new jobs; that does not mean such jobs lead to the creation of economic growth. Measuring jobs alone is an insufficient way to measure economic growth. For example, roughly 90% of the Canton-based Nissan plant employees were already employed when that Madison County facility opened. Those new employees were already paying state income taxes. Yet, every job created by the state and local government incentive package was subsidized. In total, roughly $1.3 billion was promised to Nissan. According to data analyzed by Mississippi State University’s Institute for Market Studies, Nissan pays its 6,400 workers at the plant an average of $62,500, which costs taxpayers $203,125 per worker. Had that taxpayer subsidy not occurred and the dollars remained in the private sector, would individuals and businesses have found a better “investment” use? Decades of economic research and free market evidence informs us that private citizens and firms are more effective at allocating resources to their highest uses than is government.

The chief argument around government incentives is that “everyone else is doing it, so we must join the process in order to remain competitive.” That’s the wrong approach. The desire to provide incentives is an acknowledgment that our tax, regulatory, and legal system is not competitive. It says our state has not adopted freedom-based policies. Instead of offering incentives to just a few, our goal should be to create the most business-friendly climate in the country. A public policy based on freedom is how we’ll grow our economy.

Rather than increase the hand of government in our economy, we should trust the “invisible hand” of the market place and the proven incentive of profit and loss for the allocation of resources. It is either folly or hubris to think government can have the knowledge to do that more efficiently than the market. Nobel Prize-winning economist F.A. Hayek once wrote, “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

This column appeared in the Clarion Ledger on November 2, 2018. 

Popular homesharing site Airbnb announced that they recently remitted $1 million in taxes to the state of Mississippi.

Since September 2017, Airbnb has been automatically collecting the 7 percent state sales tax and local tourism taxes on behalf of hosts and remitting the revenue directly to the state. At the time of the announcement, Airbnb anticipated collecting $245,000 during the past year.

Airbnb was able to quadruple expectations due to a 92 percent year-over-year growth for the platform in Mississippi. Over 69,000 guests utilized the service in the state during that time.

The fact that Airbnb collected and paid $1 million in taxes last year should be considered a good thing. The fact that consumers now have more choices if they want an option besides a traditional hotel is a good thing. And the fact that new competition has been inserted into the lodging industry is a good thing.

Of course, the industry that once enjoyed this monopoly doesn’t see things that way.

Linda Hornsby, executive director of the Mississippi Hotel and Lodging Association, calls it a “definite concern as it (homesharing) continues to grow.” She added, “We are monitoring the negative economic impact of that not just here in Mississippi...As it continues to grow, it exacerbates the problem.”

The so-called negative impact may be to one specific industry, but it is not to the guests who are gladly choosing this option. And it is certainly not a negative to the hosts who are earning a new income stream.

It is understandable that a group or organization that spent decades pursuing regulations to limit competition would be upset when new innovations threaten their monopoly. But the answer isn’t to impose outdated regulations on the new economy, but to deregulate existing industries.

And for government to rely on the free market and trust their citizens to be able to make the best decisions for themselves.

In this edition of Freedom Minute, we talk about why food truck regulations are not only bad for consumers and the local economy, they are often indefensible from a legal perspective.

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Few people would argue with the beauty of a California sunset. The bright lights of Times Square are tough to compete with. But there is one thing that can top the allure of California or Manhattan: your pocketbook.

While many on the left may argue that a certain class of Americans enjoy the high-tax, high-regulation burdens of our most liberal cities and states, and the perceived protections that go with it, the numbers paint a different picture.

Americans are moving to lower tax states where they are able to keep more of the money they earn. This isn’t a talking point, but a statistical reality based on migration data. Unfortunately, Mississippi is on the wrong side of both taxes and, as a result, in-migration.

Sales, property, and individual income taxes, as a percentage of personal income in Mississippi, are 9.9 percent, according to Cato Institute. That’s pretty high. In fact, only 14 states, including traditional high tax states like California, Connecticut, New Jersey, and New York, fared worse. All neighboring states had lower tax burdens than Mississippi. What effect does this have?

Mississippi had a net migration loss of over 3,500 in 2016. On a per capita basis, this means Mississippi lost 100 residents for every 88 the state gained. This is parallel with migration loses in Louisiana. Alabama and Arkansas were essentially flat in terms of migration while Tennessee added over 13,000 residents. For every 100 residents that Tennessee lost, they added 119.

Tennessee, a state without an individual income tax, is home to one of the lowest tax rates in the country with a tax burden of 6.5 percent. And they are reaping the benefits of smart fiscal policy. The Wall Street Journal reported in May: “Alliance-Bernstein Holding LP plans to relocate its headquarters, chief executive and most of its New York staff to Nashville, Tenn., in an attempt to cut costs…In a memo to employees, Alliance-Bernstein cited lower state, city and property taxes compared with the New York metropolitan area among the reasons for the relocation. Nashville’s affordable cost of living, shorter commutes and ability to draw talent were other factors.”

Twenty-six states had a tax burden of 8.5 percent or greater. Of those 26, 25 had a net out-migration. Only Maine was able to buck the trend. And not surprisingly, of the 17 states that had net migration gains in 2016, all but one has a tax burden of less than 8.5 percent. All totaled, more than 500,000 individuals moved from the top 25 highest-tax states to the 25 lowest-tax states in 2016. Those high tax states lost an aggregate income of $33 billion.

Along with the relatively high individual tax burden, our business tax climate sits at 31st best, according to the Tax Foundation. Not terrible, and actually better than Alabama, Arkansas, and Louisiana, but not great either. The same report had Tennessee at 16.

So what can we do in Mississippi? We can follow the lead of high-growth, low-tax states in the Southeast that have lower taxes, lighter licensure and regulatory burdens, and a smaller government.

This past session, the legislature debated a bill known as the “Brain Drain” Tax Credit. It would have provided a three-year income-tax exemption to recent college graduates who are Mississippi residents. And there was an additional two-year exemption for those who start a business. It passed the House unanimously but died in the Senate without a vote.

States are in competition with one another. We know this because we routinely offer incentives for select companies in the form of subsidies or tax breaks, or we propose eliminating the individual income tax for three to five years for recent college graduates.

While we are always in favor of lower taxes, these moves are just an acknowledgement that our tax burden hurts individual opportunity and the state’s economic growth. We have succeeded in phasing out the lowest income tax bracket. Instead of eliminating the income tax for just a few, we should work on eliminating the income tax for all taxpayers. And instead of offering incentives to just a few, our goal should be to create the most business-friendly climate in the country – for all types, sizes, and industries.

A public policy based on freedom is the recipe high-growth states have adopted.  It’s how we’ll grow our economy in Mississippi, too.

This column appeared in the Daily Leader on October 31, 2018. 

Mississippi’s freedom ranking moved up a couple spots from the previous year while our overall score actually declined slightly.

Fraser Institute’s “Economic Freedom of North America 2018” again paints a relatively bleak picture for economic freedom in Mississippi. Mississippi has been included among the “Least Free” states, those in the bottom quartile, for all but two years going back to 1998.

“The freest economies operate with minimal government interference, relying upon personal choice and markets to answer basic economic questions such as what is to be produced, how it is to be produced, how much is produced, and for whom production is intended. As government imposes restrictions on these choices, there is less economic freedom,” the report writes.

The data is reviewed among three categories: government spending, taxes, and regulations.

What are these categories important? As the size of government expands, the private sector becomes smaller and is slowly pushed out with government choosing to undertake activities beyond the traditional function of a limited government. As our tax burden and regulations grow, restrictions on private choice increase and economic freedom declines. Mississippi continues to have serious issues in both categories.

And we know what the analysis shows: The freer the state, the more prosperous it is. And the more it is growing in terms of in-migration. The least free, the more people are likely to be leaving in searching of better prospects.

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Though Mississippi saw a slight improvement this year in overall rankings, the state has been on the wrong path over the life of the report. When it began in 1981, Mississippi was ranked 32nd. There have been some ups-and-downs along the way, including a peak at 24th in 1995. But overall, the numbers aren’t positive. The ranking of 45th that was released last year was the lowest the state has ever been.

Going back to 1981 and for many years after that, Mississippi did much better in the government spending and taxes categories than the numbers show today. That year, Mississippi had a government spending score of 7.01 and a taxes score of 6.75. This year those scores are 4.25 and 5.85, respectively. Regulations have shown the most positive movement, from 2.27 to 5.23, though still lower than all but seven states.

In 1981, Mississippi earned a score of 5.34. This year it’s 5.11. Only two other states, Kentucky and New Mexico, have experienced decreases from 1981.

….

Mississippi performed poorly compared to all neighboring states, and much of the Southeast. Alabama had an overall score of 6.22 (25th), Arkansas had a score of 6.09 (29th), Louisiana had a score of 6.26 (24th), and Tennessee had a score of 7.43 (4th). Those numbers put Tennessee among the most free, placed Alabama and Louisiana in the second quartile, with Arkansas in the third quartile.

When it comes to promoting policies that restrict freedom, Mississippi is sitting on an island. And, unfortunately, paying the price.

….

Overall, this data isn’t far off from a recent report from Cato Institute. Their report, “Freedom in the Fifty States,” put Mississippi 40th overall. A five-spot jump from 2014, but still in the bottom 20 percent.

Some positive trends, but still a long way to go.

As children in Mississippi and around the country prepare for a night of trick-or-treating, they may unknowingly run afoul with local laws.

These aren’t laws restricting criminal actions often associated with Halloween mischief, such as egging a house or smashing pumpkins that belong to someone else. Rather, these are restrictions on who can trick-or-treat, how late they can be out, and what they can or can’t wear.

A story on Roanoke, Virginia’s trick-or-treating laws went viral earlier this month. In Roanoke, no one over 12 is allowed to trick-or-treat. Not only is it illegal, it is a misdemeanor punishable by up to six months in jail.

While the potential jail time might not apply, the city of Meridian also prohibits those over 12 from asking for candy. “It shall be unlawful for any person to appear on the streets, highways, public homes, private homes, or public places in the city to make trick or treat visitations; except, that this section shall not apply to children 12 years old and under on Halloween night,” the ordinance reads. And you have to be inside by 8 p.m.

Throughout the country, towns like Belville, Illinois, Bishopville, South Carolina, and Boonsboro, Maryland have similar age limits.

Meridian also restricts anyone over 12 from wearing a mask or any other disguise, unless they get a permission slip from the mayor or chief of police. Dublin, Georgia and Walnut Creek, California have similar mask restrictions.

The rest of your costume may also be illegal in some locales. In Alabama, it’s illegal to dress up as a minister, priest, nun, or any other member of clergy. Violators can be slapped with a $500 fine and a year in jail.

In a recent move that received national attention, the Kemper County Board of Supervisors approved a measure in 2016 that made it illegal for anyone to appear in public in a clown costume or clown makeup for Halloween that year. The ordinance expired the day after Halloween. That ordinance carried a fine of $150 for outlaws who wore clown costumes.

The conventional wisdom is that these ordinances aren’t enforced. Police aren’t asking boys who are starting to show signs of facial hair for identification to check their age. Chances are no one is spending 365 days in a county jail in Alabama for impersonating a priest or rabbi.

Which, of course, leads to the next question: Why have such laws? We already have laws on the books to restrict actual criminal activity. We don’t need additional laws that are confusing and do little but potentially ruin a fun night for millions of children.

We simply have too many laws in this country. It should not be government’s responsibility to regulate the behavior of children on a Halloween night running through the neighborhood in pursuit of treats. That responsibility belongs to the parents, just like it should on every other night of the year.

Mississippi Center for Public Policy recently added their name in support of the First Step Act.

The First Step Act will provide meaningful reform to our criminal justice system at the federal level, similar to what we have experienced in Mississippi. We know from a long history of being one of the nation’s top incarcerators that the blunt instrument of a long sentence does little to improve the conditions of our state’s communities.

The research shows that locking up low-level offenders does not produce better public safety outcomes than effective probation tools and workforce partnerships. We also know that time in prison breaks family bonds and makes it next to impossible for a person to hold down a job. That’s a bad outcome for all of us. Instead, we should be using what we know works to move people out of the system and toward productive, law-abiding lives.

Over the past three years, Mississippi has enacted a number of key reforms. During this time, the prison population has declined by more than 10 percent, driven by a reduction in prison use for non-violent offenses. At the same time, our state’s prisons are more focused on violent offenders, who now occupy 63 percent of prison beds, as opposed to 56 percent prior to reform. Today, the property crime rate has decreased by 5 percent, while violent crime has remained at a historic low.

Mississippi, like many other states, has seen the benefits of smart criminal justice reform policies. We are confident similar results can be found at the federal level.

Read the full letter to Senator Majority Leader Mitch McConnell (R-KY) here. 

Food truck regulations around the country continue to be challenged in court because they are indefensible from a legal perspective.

If Tupelo leaders continue to try to regulate these businesses in an effort to protect the brick and mortar restaurants, it is very likely the same scenario will play out in the city that gave us Elvis. The constitution specifically prohibits such economic protectionism. Our legal arm, the Mississippi Justice Institute, has already cautioned the City Council against such actions.

Rather than making the case by leveraging the consequences of a legal challenge, I would like to appeal to the leaders of Tupelo to consider the practical reasons why being on the side of economic liberty is the prudent choice. This is not a partisan issue. It is an issue of free enterprise, consumer choice, and the proper role of government in a system of capitalism.

It is not the role of government to protect any business, brick and mortar or otherwise, from competition. The free enterprise system operates correctly when consumer choice, not political blessing, is the basis of choosing the winners and losers.

From a practical standpoint, it is also a mistake to thwart a powerful economic trend like food trucks. These businesses are examples of entrepreneurs responding to market signals. In so doing, they are contributing to the local economy by serving a customer niche. Brick and mortar restaurant entrepreneurs can do the same, and many have. All of these entrepreneurs, new and old, are creating unique options and that work to build a more diverse and appealing food marketplace in Tupelo. In turn, this attracts more consumers to the downtown – creating a bigger, healthier and more prosperous local economy.

In a properly functioning economy in America, the success of a food company should be based on how good the food and service is; not on how well connected it is to the political class. In a system of capitalism, competitors respond to consumer trends with innovations and improved offerings, not by seeking government help to build a moat around their businesses. We should be encouraging entrepreneurs and risk-takers, not creating hurdles out of a misplaced sense of obligation to protect existing businesses.

In many ways, the food truck controversy is similar to those disputes we’ve seen around the country where local governments are determining how to regulate Airbnb and Uber. Rather than government looking to create new and restrictive regulations for these emerging businesses, they should be thinking about how to reduce the existing regulatory burdens on brick and mortar restaurants and hotels. The local economy would be the beneficiary of such actions and no one would argue against a policy that spurs economic growth – especially not in a state where we have struggled to experience sustainable growth in our private sector.

On behalf of customers, competition, and consumer choice, I hope this appeal to the political leaders of Tupelo does not land on deaf ears. Cites across the country are realizing these kinds of cases are very hard to defend. However, the City Council should not vote to keep the regulatory burden for food trucks low out of a fear of the legal consequences; they should do it because it’s in the best economic interests of Tupelo.

This column appeared in the Daily Journal on October 28, 2018. 

The EPA and the Department of Transportation have been working together for the past year to create a new set of standards for the automotive industry. The goal is to use a lighter regulatory hand and a more consumer-friendly approach to address the burdensome and wildly expensive standards mandated during the Obama administration.

The 2012 CAFÉ (Corporate Average Fuel Economy) standard went well beyond a rational approach in the name of the environment.

Americans should have the freedom to decide what kind of car they drive, not bureaucrats in Washington or California. Choosing that car and producing cars that meet those needs does not mean that Americans, or the companies that produce their cars, are not concerned about the environment. We can do both. We can balance social, environmental, and economic impacts.

The proposed new standards, called SAFE (Safe Affordable Fuel Efficient Autos) are a smart and reasonable approach to keeping cars affordable while also ensuring increased fuel efficiency and improved emissions. The CAFÉ standard went beyond boundaries allowed by the Clean Air Act and basically doubled the fuel efficiency standards for American vehicles - mandating new cars have an average fuel efficiency of 54.5 MPG by 2025.

For many citizens, car ownership isn’t a luxury; it’s a lifeline. Creating reasonable and balanced automotive standards will have a positive impact on millions of Americans and thousands of Mississippians who rely on their cars every single day. It’s time we let consumers decide what kind of car to drive, not unelected bureaucrats in Sacramento.

At the Mississippi Center for Public Policy, we support the SAFE standards for four main reasons:

• We believe automakers should design vehicles to meet the choices of consumers, not to meet the preferences of bureaucrats.
• We believe no state should get to dictate the kinds of cars another state’s citizens can or should drive. To California, we say, “You sweep your porch and we’ll sweep ours.”
• We believe the CAFÉ mandates were based on a world of energy scarcity, not the world of energy abundance in which we live today.
• We believe if left unchanged, the current standards would significantly increase the average cost of a vehicle and provide an unnecessary burden on many Mississippians – even pricing some consumers entirely out of the new car market. This would increase safety risks for some and could also prove to be a drag on the automotive industry – an important part of the Mississippi economy.

For additional reading on the proposed reforms, check out this article:  https://thehill.com/opinion/energy-environment/409512-unreasonable-demands-stifle-real-environmental-progress