Harvard Professor: Mass. Targeted Industry Subsidies Unfair

January 28, 2011 -

The Boston Herald offers an editorial on state representative Vincent Pedone's proposal to offer tax breaks to the game industry in Massachusetts. The author, Edward L. Glaeser (professor of economics at Harvard University and author of the forthcoming book "The Triumph of the City"), compares it to the disastrous results of Evergreen Solar and ponders aloud if this is all "throwing good money after bad?"

Two weeks ago, a major tax break recipient in the state, Evergreen Solar, announced that it was closing its Devens, Mass. factory. Why are people so ticked off by this news in the state? Because the company took advantage of $58 million in state aid. Evergreen Solar was launched in 1994 as a joint venture of alumni of Mobil's Solar Division and an MIT scientist who pioneered String Ribbon solar cells. As the company matured and prospered the state took notice. In 2007, Massachusetts gave the company $58 million in grants, tax breaks, and other incentives to open a plant in Devens. The company obliged, taking the money and opening the plant. Fast forward to 2001: the company announces that it is leaving the state and moving its manufacturing operation to China. While the state is doing its best to get some of those funds back, the loss of jobs in the region and the investment have given the state a real black eye. In short, the deal seems foolish in hindsight.

Glaeser says that Pedone's proposals for the video game industry seem eerily familiar. While the details are still forthcoming the main part of the deal would be through a transferable tax credit that pays for around a quarter of a video-gaming company's labor costs. The company taking advantage of the bill would get even more credits if the video games are developed in a "disadvantaged community" or if the games prominently feature the "Massachusetts state marketing logo." The logo on the box program sounds exactly like what Georgia does for video game and film companies that promote the state prominently in some way on or in their products.

While the author admits that the video game industry is more likely to succeed because it "plays to the Commonwealth's creative strengths," he also says that that fact "doesn't make it more worthy of subsidy." He also cast doubt on whether the commonwealth's parents "want their children's video gaming supported by state subsidies."

Another point he makes is that the video game tax credit "is paid after, not before, workers get hired, and that reduces the difficult problem of enforcing claw-back provisions."

One of the most ludicrous comments he makes is that some firms that are not in the video game industry might be encouraged "to masquerade as video gamers, even if their main business is something else" to get these tax credits. What?

We will let Glaeser have the last word here - an opinion that many businesses in the state would agree with:

"Targeted subsidies, for Evergreen or video gaming, are neither fair nor likely to engender wide-spread economic growth. The best economic development strategy is to improve fundamentals: fewer regulations, lower tax rates for everyone, good services, and especially good schools."

Source: Boston Herald


Comments

Re: Harvard Professor: Mass. Targeted Industry Subsidies ...

 "Targeted subsidies, for Evergreen or video gaming, are neither fair nor likely to engender wide-spread economic growth. The best economic development strategy is to improve fundamentals: fewer regulations, lower tax rates for everyone, good services, and especially good schools."

Holy smokes, that's about the most clearly sane thing I have heard anyone say about tax subsidies in a long time.

Re: Harvard Professor: Mass. Targeted Industry Subsidies ...

That is true, however he seems to have disregarded the fact (of which I am sure he is aware) that these measures are intended to keep the state competitive with other areas in the US and Canada which offer similar subsidies.

Also, his "doubt on whether the commonwealth's parents "want their children's video gaming supported by state subsidies."" is a moot point that he and many others have tried to apply to the issue. This is not about encouraging the production of video games, it is about maintaining a share in a wealthy industry. Children (and adults) will still be playing video games regardless, but the proceeds would not be going towards jobs in the state if developers move to a location with better trading conditions.

 
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Andrew EisenI bet there's a lovely comedy of errors surrounding that list's journey to the IGDA's page!11/22/2014 - 6:49pm
Andrew EisenAnd the fact that it was curated by some random person on Twitter should have been another.11/22/2014 - 6:48pm
Andrew EisenYep, it's pretty clear that whoever at the IGDA grabbed that list, didn't look at it first. I think the fact that there's over 10,000 names on it should have been a bit of a red flag.11/22/2014 - 6:44pm
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Wonderkarpthats better, though I'd prefer something a little more than a simple tweet, I'll take it.11/22/2014 - 6:37pm
Andrew EisenKate Edwards' Twitter: "like people, tools are imperfect; we've removed it for now."11/22/2014 - 6:35pm
Andrew EisenHard to say with any certainty but it appears it at least understands the tool didn't do what it thought it did.11/22/2014 - 6:34pm
WonderkarpI've yet to find the IGDA responding too the situation other than deleting a link.11/22/2014 - 6:34pm
Matthew WilsonI hope the IGDA understands why its a mistake, that's all I want.11/22/2014 - 6:33pm
Andrew EisenHeh, lawyering up would be grossly overracting! And really silly. Well, if what the IGDA did say was not enough for you, try contacting them and letting them know how you feel.11/22/2014 - 6:31pm
Wonderkarpall I want is an apology from the IGDA. nothing fancy, not even addressed to me. Just something that says, "We messed up. We're Sorry" thats it. Not exactly those words except Sorry. If I was overreacting, I'd be lawyering up.11/22/2014 - 6:29pm
Andrew EisenI get it, I just think you're taking it the wrong way and overreacting.11/22/2014 - 6:27pm
Wonderkarpatleast Matthew understands why I am miffed at that list11/22/2014 - 6:26pm
Andrew EisenMatthew - That I agree with. Linking to that list was silly. Hopefully IGDA will more carefully vet the resources it links to make sure they do what they're supposed to.11/22/2014 - 6:25pm
Andrew EisenNope. No insults.11/22/2014 - 6:21pm
WonderkarpAnd here come the insults. Wanna throw some more?11/22/2014 - 6:18pm
Andrew EisenYou're an English major? Wow.11/22/2014 - 6:16pm
Matthew Wilsonno I am glad they did, but I want this talked about so it does not happen again.11/22/2014 - 6:15pm
 

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