Let's dump disincentive to growth

When it comes to companies moving to Colorado Springs, what's the difference between offering incentives and removing disincentives?
Often nothing more than who gets credit for the jobs created.
On May 12, City Council unveiled its dynamic plan to help Hewlett-Packard build a $260 million data center in Colorado Springs. The city government will rebate the sales and use taxes associated with the costs of building the new facility, along with portions of other taxes. This $4.8 million package of "incentives" will keep 125 high-paying HP jobs in Colorado Springs, as well as provide jobs for the laborers and contractors involved in the construction project.
Local citizens will get work, and City Council will get to put new jobs on its résumé.
The only problem with this story (other than the fact that it privileges one select corporation at the expense of local businesses already paying their taxes) is that it presents an inaccurate picture of government's role in job creation.
The use tax (a one-time tax on any business goods, from tables and chairs to lumber, bought outside but used within the city's jurisdiction) has long presented an artificial obstacle to economic growth. By removing it, City Council is simply getting out of Hewlett-Packard's way, something it should have done long ago.
David Bamberger, an oft-quoted local economist, has been railing against tax disincentives for years. Most recently, on July 6, 2008, he published a column in The Gazette about the vanishing semiconductor industry, writing, "During the past several decades, Colorado Springs has experienced lost opportunities for business investment and job retention at least in part as a result of high ... use taxes on manufacturing equipment."
While Bamberger's column deals specifically with use taxes levied on "manufacturing equipment," his analysis could also apply to HP's building materials. After all, if we say that waiving the use tax was the economic factor that persuaded HP to build here, then we have to acknowledge that HP would likewise have built here if there hadn't been a use tax to waive.
The difference is not economic but political. If there were no use tax to waive, City Council might not get to appear in the articles written about HP's new project.
Speaking as if City Council played a creative role in HP's decision actually provides a perverse incentive to keep the use tax in place. Every time councilmembers "offer incentives" by waiving the use tax, they get a new chance to talk about the jobs they're creating. If, however, they were to eliminate the use tax altogether, the credit for new jobs would go to the free market, with the city's "anti-tax" and "anti-government" culture claiming its rightful share.
City Council projects that, after the $4.8 million package of tax rebates, HP's new data center will bring the city $25 million in revenue over the course of the next 10 years. Waiving the use tax will allow HP to create jobs, which will create salaries, which will create spending, which will create sales tax revenue. This last phenomenon, combined with HP's utilities and real property tax payments, will more than compensate city government for its initial loss. Both the economy and the general fund will grow.
What's true for HP holds true for other businesses. Phasing out the use tax would give every company the same economic stimulus to build new facilities or expand existing operations, events which in turn would increase the tax base and help to solve the city's budget problems.
There's no time to waste. The use tax has already done irreparable damage to our economy. In his column about the semiconductor industry, Bamberger wrote, "Certainly, less-than-favorable conditions and offshore competition have had something to do with the local semiconductor plants closing their doors in Colorado Springs. It is clear, however, that unfavorable tax laws have been a contributing element."
If councilmembers are willing to exchange the short-term gratification of brokering incentives deals for the long-term gratitude of constituents, they should eliminate the use tax.
Instead of keeping the red carpet tucked away in City Hall, to be rolled out for the occasional photo-op, let's give every business the red carpet treatment. If we did, companies would flock to us in droves, and HP might not seem like such a remarkable story.
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Cole, of Colorado Springs, is a writer, translator and political organizer. Readers can reach him at dancoloradan@yahoo.com.