Politicians have lost, and will lose, billions of your tax dollars thanks to failed attempts to pick winners and losers in the private sector. Recently, BC's government is getting more active in this game of "taxpayer chicken."

Here is an abbreviated version - six reasons - out of the Federation's 13 reasons, why governments of any political stripe should refuse to subsidize business. For a more detailed look at the issue, the full article is on our website at www.taxpayer.com.


Reason #1: Governments choose winners and losers

In a 1983 study undertaken at Queen's University, Dan Usher evaluated the benefits and costs of five federal business grant programs. In 40% of the cases, the government grants represented 50% of the company's net worth. In 20% of the cases, the grants represented 175% of the company's net worth. In essence, those grants contributed to a significant increase in shareholder wealth, fine if it were a natural result of marketplace decisions, but as Usher pointed out, "the federal government may be in the business of appointing rich men as a natural and inevitable consequence of the grants program."


#2: It produces a welfare mentality

When you go through the federal public accounts, which lists all those groups and businesses receiving assistance in excess of $100,000, you repeatedly find the same businesses year after year. Companies at the tax trough become dependent on government help. If a business needs taxpayer assistance to start, it often needs taxpayer money to keep going.


#3: It becomes job redistribution, not job creation

Politicians eagerly take credit for taxpayer-financed jobs in their constituency. They fail to recognize, however, that these jobs have simply been redistributed. When BC politicians backstopped pulp plants like Skeena Cellulose with taxpayer money, they were quick to take credit for the jobs "saved" at that mill. Of course, when other pulp mills in competition with the taxpayer-subsidized mill laid people off because an inefficient mill is propped up and still selling products that a non-subsidized mill would have sold instead, the politicians are nowhere to be found.


#4: It puts tax dollars at risk

Billions of tax dollars are lost through business closures or repeated bailouts. In the 1980s for example, Ottawa paid out $1.8 billion in loan guarantees on behalf of Canadair and $586 million on behalf of De Havilland. This resulted in nearly $2.4 billion in taxpayer losses. In Alberta between 1981 and 1996, $2.6 billion of taxpayer money had to be written off the public accounts thanks to grants, loans, and loan guarantees that flopped.


#5: It's the wrong priority for tax dollars

Is this where taxpayers - who lose nearly 50% of their income in taxes - want their money spent Or would they prefer lower taxes, more competitive businesses not propped up by taxpayer subsidies, and the taxes they do send to government to be spent on priority programs like education and health care


#6: Political decisions will trump economic ones

As long as there are politicians, there will be patronage. The best one can hope for is simply to reduce the opportunity for it. When then-BC Forestry Minister Dan Miller bailed out Skeena Cellulose, it just happened to be the mill in which he used to work.

If the BC government wants examples of where their latest economic policy - taxpayer handouts to businesses - has already been tried, they need only get out of their legislative bunker and take a look across the country. The landscape is littered with the failed corporate welfare practices of governments right across the political spectrum.