In 2010, the very large Polsinelli Law Firm received millions in tax incentives to help it “decide” to keep its office in downtown St. Louis. The exact amount of the subsidy is unknown, but as of 2016 its total value was reported as being around $3 million. So, in other words, lots of money.
Clearly, since government economic development officials are so good at picking winners and losers, this subsidy has accomplished its goals and now the firm is operating without any tax subsidy and thriving in downtown St. Louis, right?
Not quite. Polsinelli announced two months ago that it is moving its local office to Clayton. No subsidy is required for this move (to the best of my knowledge). Polsinelli will be moving to the Centene Building, which is itself an argument for the uselessness of tax incentives.
Polsinelli has every right to move wherever it wants and I wish the firm the best. But as the City of St. Louis, Chesterfield, Crestwood, and more continue to dive headfirst into the tax subsidy well, the Polsinelli example is a perfect illustration that economic development based on tax incentives does not work. It just doesn’t. Politicians and economic development officials cannot predict the future. Their decisions are biased by political interests, or worse. The incentives for politicians and economic development officials bias them toward ribbon cuttings and campaign boasts at the expense of long-term thinking.
Yet we continue to prime this empty pump with new plans and programs every year, despite the repeated failure of the process. Economic development officials boast loudly of their few successes (which really just means the subsidies weren’t needed in the first place) while ignoring their many, many failures. It’s almost as if actual economic development isn’t their main goal in the first place.
