Letter to the Editor: "It is sad the City Council has chosen to prostitute itself" in attracting a new grocery chain

"In Stephanie Fromm's recent Letter to the Editor, she wishes to help people better understand the implications of TIFs, tax abatements and tax rebates but only tells half of the story.  I would like to explain the other less glamorous half.

First, it is crucial to understand that the basic purpose of a business is to make a profit for its owner. To do this, a business must produce a product or provide a service at a cost the consumer wishes to pay. In order to do this, they must create jobs. No jobs, no business, no profit, so any time a business promises to create jobs for the community it is not because of some altruistic desire to increase employment in the community. It is because they want to make a profit and have calculated they can best do so in that community.

Second, free market economics has done more to advance civilization and raise people out of poverty than anything else in the history of the world but in order for it to work properly, companies must operate on a level playing field. The company which does the best job at the best price should be the one that succeeds. Taxes are a part of every business' expenses which affect their profit margin and thus the cost of their product. When you reduce one business' taxes, and thus their expenses, you are giving them an artificial advantage over their competitors. Competition in business is good, but the taxpayer should not responsible for the unearned profits of any business.

 

Lastly, property taxes are the means by which local governments provide funds for the services necessary to operate and maintain the infrastructure of a city. Increased demands are usually met by the increased revenue from those creating those demands. When those creating the demand are excused from paying for the cost because of tax abatements and refunds, those costs are passed along to all the other property taxpayers and taxes go up.

According to the numbers Stephanie presents, the incentive package to the new business coming in should be around $720,000 and all will be well once the business starts paying their full tax bill in the future. However, when the increased future tax revenue starts to come in, the Decorah City Council will assume that everyone has become accustomed to their new higher taxes resulting from of all the subsidization; that a $720,000 decrease in property taxes spread across all property taxpayers will hardly be noticeable; and will just take that amount as extra to spend.