“In the end, the money that towns across America gave General Motors did not matter.” That’s the conclusion of a New York Times investigation of local subsidies.  They chronicle the proliferation of over $80 billion in local subsidies to businesses of all shapes and sizes across the United States.  (You can search the database for yourself here.)

According to the NY Times investigation, “as [GM’s] financial problems grew, incentives became a big part of its math.”  Put another way - as GM’s ability to build cars people wanted to drive declined; they ramped up the ability to take money from taxpayers.

The Fraser Institute’s Economic Freedom of North America 2012 study argues these incentives diminish economic freedom because“[w]hen the government taxes one person in order to give money to another; it separates individuals from the full benefits of their labor and reduces the real returns of such activity.”  

It’s rather intuitive that when we reward lobbying instead of production we get less production, which is why the Fraser Institute’s study “shows a powerful, consistent, and robust relationship between economic freedom and growth.”

Unfortunately, state and local governments in Kansas have been doling out $1 billion to politically-favored businesses in recent years.  The deterioration of economic freedom over the years has resulted in Kansas dropping below five Canadian provinces in the Fraser Institute’s annual economic freedom rankings.

There is hope!  Now that our state has lowered taxes for all Kansans by $800 million it seems there is hope that leaders in Topeka are less interested in picking winners and losers. So everyone in the state will have a little bit more money in their pocket and a better chance to chase their dreams. In fact, if you eliminate the $1 billion in subsidies Kansas governments give every year, then tax relief is paid for and cronyism is turned back. That is commonly referred to as a “win-win proposition.”