GOP’s strained ties with business

Republicans like to think of themselves, and portray themselves, as defenders and protectors of free markets.

And, compared to Democrats, Republicans are, as a general rule, far more willing to trust markets to productively, efficiently and fairly allocate resources and provide goods and services.

That acknowledged, there are fissures in the GOP support for free markets, and they are growing.

Some of them are old. Republicans have always had a hard time resisting a business asking for a handout. There is a difference between being pro-business and being pro-free markets.

And some of them are new. The populist impulse driving GOP politics today is less deferential to property rights and other foundations of a free-market economy.

A couple of obscure bills in the Arizona Legislature illustrate the points.

A decade ago, a Republican governor, Jan Brewer, and the Republican Legislature decided to get Arizona into the incentives game in a substantive way. The

Arizona Commerce Authority was formed and given a suite of tax credits and grants to divvy out to selected businesses.

Gov. Doug Ducey initially ran for governor expressing skepticism about incentives, but fully embraced them once in office.

Now, this whole scheme violates free-market principles. Government is supposed to provide a level playing field for all businesses. Favoring some businesses over others distorts the allocation of capital and the market competition that is supposed to determine outcomes.

One of the items in the Arizona Commerce Authority’s bag of goodies is an income tax credit for the building of new or rehabbed “qualified facilities” — generally a manufacturing plant, research facility or a corporate headquarters of some sort.

Businesses are pre-qualified by the Commerce Authority for the tax credit and then can take it over five years once the facility is in operation and employment has been expanded.

There was a cap of $70 million on how much in these pre-approved tax credits the Commerce Authority could dole out a year. It has been bumping up against the cap, so the Legislature this session increased the cap to $125 million (House Bill 2321).

A fiscal note prepared by the legislative budget staff raises considerable doubt about the need for a cap increase. While the Commerce Authority has been pre-approving roughly $70 million of tax credits a year, in 2020 only $3.4 million of them were actually taken. There’s apparently a large gap between promise and performance — a demonstration of the puffery involved in the Commerce Authority’s claim to be the Atlas holding the state’s economy on its shoulders.

The free-market position is that such a tax credit shouldn’t exist, much less be expanded. Yet only seven Republicans in the House and three in the Senate voted against final passage of the bill.

The second bill (HB 2190) is stalled, but still illustrative. Populists on the right are fretting about the possibility of vaccination passports, some sort of requirement that people get vaccinated to receive goods or services.

So, Sen. Kelly Townsend hijacked a House bill, with the consent of its prime sponsor, to serve as a vehicle for a ban on vaccination passports. The amendment would prohibit businesses or governments from requiring vaccination as a condition of receiving goods and services. A violation would be a Class 5 felony.

Now, it is highly unlikely that any business would make vaccination a prerequisite for buying a good or receiving a service. Nevertheless, on a theoretical level, this pits the populist repulsion over vaccination passports against the property rights of the business owner.

If a business owner wants to require proof of vaccinations to protect his employees and other customers against infection, why should government have the authority to override that? It’s his or her business, not the government’s.

Nevertheless, all the Republicans on the Senate Appropriations Committee voted for the vaccination passport ban. Apparently other Republicans have reservations, since it hasn’t made progress beyond that.

To further illustrate the GOP crosscurrents on free-market principles, Townsend was one of the few Republicans to vote against the qualified facilities tax credit expansion.

As big business increasingly becomes a woke battering ram, the GOP instinct to be the pro-business party, or at least the pro-big business party, is waning. That could be a healthy step. But not if the populist impulse jettisons free-market principles themselves in the process.