Socialism seems to be garnering renewed interest in media and political circles. A millionaire socialist currently leads in some polling for the Democratic Party nomination in 2020, and the most outspoken new members of Congress unabashedly proclaim themselves democratic socialists.
Most readers will chuckle at the rise in popularity of a form of government that has condemned so many to impoverished misery. It is easy to dismiss much of what new socialists say, and in truth, much of it is bizarre enough that it truly hurts their cause. Short film clips of Bernie Sanders or Alexandria Ocasio-Cortez will surely feature prominently in GOP campaign ads, if not in the Democratic primary.
Still, if you believe that individual agency, including the right to own the fruits of one’s labor are essential to human flourishing, simply defeating the current crop of socialists at the polls might not be enough. No one benefits from a policy debate that is drawn so inexorably towards the dangerous fringes of ideology. We would do well as a nation to stand well away from the precipice of tyranny that follows socialism as night follows day.
We need to do more than simply laugh at their naïveté. Perhaps, those of us who believe in freedom need to ask ourselves some tough questions. Instead of simply dismissing the democratic socialist, maybe we ought to ask a simple question: What part of their criticism of our market economy is right, and what should we do about it?
In truth, these are easy questions. Maybe the only thing the democratic socialists actually get right in their criticism of our market economy is the exaggerated influence of big business in tax policy and spending. Nowhere is this more apparent than in state and local tax incentives. We might even be at a turning point.
Wisconsin’s disastrous deal with Foxconn effectively taxed every family more than $1,500 to pay the company to locate in the state. Even before the deal fell apart, Gov. Scott Walker was ousted from office over the fiasco. Other states, including Indiana, are waging court battles to keep their proposals to Foxconn a secret.
The payments to Amazon promised by Virginia and New York were bad enough to cause mini-revolts in both states. Folks, Rep. Ocasio-Cortez was right to oppose the New York deal, and citizens of all stripes joined her dissent. She was wrong to wish Amazon away from her district. It is a fine business that can afford to pay for its own headquarters. Today states, including Indiana, are doing everything they can to keep their own proposals to Amazon a secret.
The Foxconn and Amazon deals stretch the conscience. There can be little more outrageous than large, successful companies forcing communities to ransom their futures to shareholders. Both companies took deals that amount to hundreds of thousands of dollars per new job. As astonishing as this is, it is nothing compared to Indiana’s new tax exemption for data centers.
Quietly, with zero fanfare, the Indiana legislature passed a 50-year tax exemption for data centers. The exemptions cover property and sales taxes for half a century. For several days, I’ve been scouring academic studies and reports to find evidence of nothing like it in American history. I have found nothing even remotely as expansive. I even spoke with some well-known researchers at think tanks. The guy on the left, Greg LeRoy, called the plan “heinous” and the guy on the right, Mike LaFaive, said it “strained credulity.” They knew of nothing faintly resembling this in American history.
By my calculations, the data center tax exemption would cost communities something more than $4 million per job. This is just property taxes for establishments that on average create just 30 jobs. The lost sales tax on equipment is perhaps $52 million and I struggle to imagine what the lost taxes on electricity sales would be, since data centers use about 2 percent of all electricity in the US.
At the risk of piling on about the badness of this, the General Assembly decided to make this tax exemption retroactive to data centers built after 2012. This at least clarifies the intent of this legislation; it is a giveaway, and nothing more. There is simply no way to sugarcoat the fact that Indiana just passed the single worst tax incentive in American history.
To be fair, local governments rightfully ask for more flexibility, and this law does not require local governments to grant the exemptions. Still, I don’t think this gives them much flexibility. Moreover, this abandonment of fiscally conservative principles by the General Assembly stuns the senses. To make things worse, this law seems tailored primarily for Hammond, where taxpayers passed a school property referendum just last year. Voters might be inclined to ask their elected leaders why it is necessary to pass a school referendum while some tech giant gets a lifetime tax exemption?
Socialism is a bad idea that failed the grand social experiments of the 20th and 21st centuries. Most Americans know this.
However, the enduring wrongness of socialism does not mean socialists are wrong about everything. They are right to view the breathtakingly unequal treatment of large business as unprincipled failure of government. Democratic socialists are politically wise to note the deep political hypocrisy of these deals by erstwhile conservatives.
Still, I don’t think the risk to Americans is that voters will suddenly swarm to bad ideas of democratic socialism. The real risk is that given the choice between democratic socialists and republican socialists, they choose the one that at least sticks to its principles.
Michael J. Hicks is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University.