Grassroots Economic Development

By Marc Kilmer

It’s probably not news to you that Ohio is not the easiest state in which to operate a business. This isn’t just a hunch business owners have, though. There is empirical evidence to support it. The Tax Foundation, a nonpartisan research organization, rates Ohio’s business tax climate worse than forty-six other states. In 2008, Ohio’s economic growth ranked behind forty-four other states. Unfortunately, there is little appetite in Columbus to address the fundamental problems facing Ohio businesses.

Ohio policymakers are enamored with top-down initiatives that seek to create economic growth. Tax credits and subsidies for certain kinds of businesses currently in favor with the political class seem to be the extent of policymakers’ ideas. As we saw with the demise of Skybus and DHL and ethanol plants throughout the state, though, this type of politically-driven economic development often ends up being a costly burden to taxpayers with few or no jobs created.

While it is difficult for politicians to contemplate, economic growth is not created through government agencies. Instead, it comes from the efforts of business owners, their employees, and their customers. It can’t be directed from above but it certainly can be stifled. When a state has a high tax burden or imposes onerous regulations, no bureaucrat from the Department of Development can fix things.

Instead of looking to direct economic development, Ohio policymakers need to create a climate where business owners can thrive. A reduced tax burden, a simplified tax code, fewer and more reasonable regulations — all these things will do much more for the state’s economy than another tax credit or low-interest loan program.

Unfortunately, creating an economic climate where economic growth is stimulated doesn’t provide as good a photo op as handing a Department of Development check to a business owner. Hopefully Ohio politicians will realize their top-down growth strategy hasn’t produced much growth and will instead decide that creating jobs is more important than taking credit for a special interest tax break.

Source: Buckeye Institute for Public Policy Solutions, August 24, 2009.

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