Consumption, Production, and Economic Growth
Association President Howard Stephenson was on the Doug Wright Show on KSL this morning. Doug disagrees with the Utah Taxpayers Association regarding economic development. Doug argued that Utah’s population is growing and therefore subsidizing retail and entertainment with tax dollars makes sense. The association argues that subsidizing locally driven retail (and entertainment) is a wasteful use of tax dollars because retailers and entertainment venues will come to Utah on their own without subsidy or incentives as long as there are people who are willing to buy their products.
Government can’t get people to spend more money by subsidizing local retail and entertainment. Retail expenditures occur on their own. If government wants its citizens to spend more money, it should cut taxes which gives consumers more money to spend, and it should create a climate that attracts high wage businesses.
Besides, the real key to economic development is not consumption but production. Nations, states, and households that focus on production instead of consumption end up making more money in the long run which allows them to consume more while increasing their savings rates at the same time. Utah should focus on ways to improve its productivity. That includes an education system that is improved through choice and competition and a tax structure that encourages investment in businesses that export goods and services or improve productivity (telecommunications, for example).
Economists are in general agreement that stadiums are not the engines of economic development that stadium proponents claim they are, mainly because most of the economic activity the occurs at or around the stadium is economic activity that is already in the state economy or would naturally occur in the state economy due to population growth. While stadiums attract some money from outside the economy that wouldn’t come to Utah otherwise – like an occasional Real Madrid game that will not be played in the new Real stadium anyway because the new stadium will not be big enough -- subsidizing stadiums is still a very low bang for the buck.
Doug also argued that using hotel taxes for Real’s soccer stadium is OK because out-of-state tourists, not Utahns, are paying this tax. The association maintains that hotel tax dollars are still our tax dollars – even if they are paid by outsiders -- and need to be spent appropriately. Just because non-Utahns are paying this tax doesn’t mean we should accept a lower standard as to how these dollars are spent. In fact, if politicians recommend funding something with taxes on tourists instead of funding the same project with property taxes, you can usually be sure that the project is not worth funding at all.