It is. Corporate welfare sustains inefficient old firms while impeding innovative new firms. In this Forbes piece, George Leef discusses the use of tax waivers or direct subsidies to attract firms to a city or state. As he points out politicians of all stripes do this:
One of the great bipartisan follies of American politics is the idea that the way to make your state (or city) more prosperous is through corporate welfare – in particular, policies meant to lure in companies with cash, tax breaks, or both. Rare is the politician in either party who dissents from the conventional wisdom that it’s the government’s task to “improve the economy” by using targeted incentives.
Usually, few constituents benefit from the corporate welfare. It is also unnecessary for economic growth, and we’ve known this for a long time. Leef provides a quote on the topic from none other than Adam Smith:
Adam Smith famously put the point this way: “Little else is requisite to carry a state to the highest degree of opulence…but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things.” Hong Kong is a perfect illustration of the progress people will make if the government just sticks to protecting their rights.
That would limit opportunities for demagoguery or graft. Can’t have that.
(Originally published 5-17-2015 in my personal blog)