Corporate Welfare and its Insidious Destruction

When the Wyoming Business Council proposes a handout for a private business, the focus is on the positive—jobs, economic diversification, the flag and apple pie. When it brings these proposals before the State Loan and Investment Board (SLIB), the costs of these handouts—wasted resources, cronyism and the damage to unsubsidized competition—go unmentioned. The proposed $407,000 handout to the City of Chugwater is a good example of how attracting a tax consuming business to town wastes resources and worse, it could harm a taxpaying business. When this proposal comes before the SLIB, it must decline to rubber stamp this handout.

Back in December 2012, a car crashed into the Horton's Corner convenience store and gas station in Chugwater and the place burned down. The owners decided not to rebuild and put the site up for sale for $350,000. With no gas retailer in sight, the Town of Chugwater approached the Wyoming Business Council for a grant to attract a new gas retailer to town. Chugwater wants to buy the property for $407,000, or $57,000 more than its current listing. Further adding to the cost, the town plans to subsidize the lease or sale to an investor willing to set up a convenience store and gas pumps on the site.

Not only is this a lose-lose for taxpayers, other businesses have done well since the Horton's Corner store burned down. The Chugwater Soda Fountain picked up the slack in 2013 and is still doing good business. Now, subsidized competition could change that. The Soda Fountain's owner Barb Dayton said she is worried a new station would have a fast food chain and that would hurt her business. This is a good example of how taxpayer-funded competition makes it difficult for good businesses to operate as no private individual can compete against the deep pockets of government.

According to the Wyoming Business Council grant proposal, the Town of Chugwater's primary motivation for asking for state money is the desire to recapture lost sales tax revenue, as citizens now travel elsewhere to make purchases. While the town may get more tax revenue should someone decide the handouts make it worth their while, subsidized payments could be a drag on resources and mean the town could miss out on other taxpaying options. But worse still, it could damage other small businesses in Chugwater that have stepped into the void. By bringing a heavily subsidized option to town the people of Chugwater may see no net benefit and existing small businesses may be hurt.

As we can see, corporate welfare has many costs the Wyoming Business Council and other handout cheerleaders neglect to mention. First, forcing taxpayers to pay more than the listed price and then subsidize a private sector investor mean the taxpayer is getting hit twice – first to subsidize the former station owners and then to subsidize the new station owners. Second, in the two years since the accident, private sector investors have declined to buy the site and set up a new gas station. Maybe it is because they don't want to lose their money. Third, although this grant is a federally funded pass through, handouts send a bad message to investors and increase the incentive to lobby for more handouts.

Of course the worst crime is the damage to small businesspeople that used their own resources to fill the void.

This is but one example of a local government using tax dollars it didn't collect to pay more for a piece of land than anyone else and then continue to bleed taxpayers to subsidize yet another private business. This type of waste is bad any time but particularly bad now as mineral tax revenues decline and some legislators are talking about creating an income tax to support continued wasteful state spending. But we still have one last chance to kill this handout. When the proposal comes before the SLIB for final approval, it must instead reject this corporate welfare scheme.