Gov. Doug Ducey of Arizona loves his country and doesn’t look kindly on attempts to besmirch the Founding Fathers. That’s why he retaliated against Nike after the company withdrew a line of shoes emblazoned with the Betsy Ross flag, following gripes from someone called Colin Kaepernick that the 1776 banner represented slavery more than independence and self-governance.
But there is a detail to this story that has been missed in debate, and it’s a detail of America’s founding on which we hope Ducey will reflect.
Let’s start with the Boston Tea Party and then come back to Arizona in 2019.
“No taxation without representation” was a rallying cry among politicians who effected American independence. The Stamp Act of 1765 and the Townshend Acts of 1767 infuriated colonists and stoked fires of resentment, but neither tax was enough to spur the massive theft and property destruction that was the Boston Tea Party.
No, Parliament triggered that riot not through a tax, but through cronyism — a special-interest tax break.
You could call the Tea Act of 1773 a tax cut. But you could also call it corporate welfare, because it cut taxes only for one company. “The Tea Act exempted the East India Tea Company from the tea tax,” wrote economist Matthew Mitchell, “permitting the company to undercut its rivals and giving it a monopoly in the tea trade.
Governments need taxes to fund their operations, but for many politicians, taxes become a tool for trying to shape the economy by picking winners and losers. Hike a tax high enough, and then a special exemption becomes incredibly valuable. The practice is corrupt. It’s bad economics. And it has been part of American politics from 1773 until today.
Consider the Arizona Commerce Authority. This state entity has the power to dole out millions of dollars to favored businesses. For instance, the commission was planning to hand a $1 million grant through the “Arizona Competes Fund” to sporting goods giant Nike to bribe it to set up its factory in Goodyear, Arizona, near Phoenix.
Ducey has withdrawn that $1 million special handout in response to Nike’s decision that the 1776 flag is offensive.
Now Democratic governors, eager to earn the love of Nike and its publicist Kaepernick, are scrambling to lure the factory. Michelle Lujan Grisham of New Mexico and Gavin Newsom of California have both publicly invited Nike to set up their flag-free shops in their respective states. A bidding war of handouts seems about to start.
Nike’s decision is offensive. A $1 million grant to Nike would have been stupid. That doesn’t mean the Ducey story is fine. Politicians shouldn’t be in the business of telling shoe companies what they should and shouldn’t put on their shoes. This is another cost of the whole business of taxes and incentives. He who pays the piper calls the tune. So the more discretion politicians have over the profits, fees, and taxes of individual companies, the more those businesses get dragged into politics.
Ducey should follow his decision to revoke Nike’s subsidy with a decision to revoke every subsidy by the Arizona Commerce Authority. Then he should abolish the authority and cut the state’s corporate income tax by 10%, giving every company a tax break rather than simply the politically favored ones.
Taxes, after all, are a necessary evil. Special-interest favors, on the other hand, should be dumped overboard.
