Date: 11/12/2009
Final
Presentation by Jeff Zax
COMMITTEE ON JOINT FINANCE
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10:26 AM -- Presentation by Jeff Zax
Mr. Jeffrey Zax, Economist at the University of Colorado, began his presentation by discussing government subsidies in enterprise zones. He explained his opinion that government subsidies do not enhance or increase growth during economic downturns. Mr. Zax also shared his analysis of enterprise zones and firms. He stated that the enterprise zone credits encourage firms to replace workers with machines. He stated that enterprise zone subsidies become more valuable as a firm ages, and the subsidies are driving up property values. This was never the intent of enterprise zone subsidies, he stated.
Mr. Zax continued expressing his thoughts about enterprise zone tax incentives. He also stated that economic multiplies have no basis in economic science. The effects of these subsidies are overrated because individuals will create businesses and ideas in the economy. The subsidies also have no accountability and are counterproductive.
10:34 AM
Representative Kagan asked whether we know if jobs have been saved by the enterprise zone tax credits. Mr. Zax stated explained the research that had been conducted on this subject, stating that it compared these firms with firms outside of enterprise zones, and that these companies outside these zones did better. Discussion continued about these issues.
10:40 AM
Representative Gerou asked about his thoughts about a federal bailout. He responded there is a difference in macro and micro economic realities, and the federal bailout was necessary because the nation faced either a bailout or another depression. In the end, this money needed to be spent to keep the economy on its feet.
Senator Sandoval asked whether enterprise zones can be made to work, and Mr. Zax stated that they do not. He stated it is not a public service to create jobs. The purpose of a business is to make a profit and individuals must have a claim on the public benefit. Representative Roberts asked about policy makers and the economy. Mr. Zax responded that these credits have a record of failure around the world and the idea that policy makers can direct the economy is extreme. Government should provide the public services businesses need. Rep. Roberts asked where the jobs are coming from under his scenario and Mr. Zax explained the jobs will come from individual entrepreneurs that find support for new ideas and businesses. Mr Zax stated the private sector ideas are taking the lead, and if ideas are not good, they will vanish from the economy.
10:48 AM
Senator King asked whether he would support eliminating other tax credits, and Mr. Zax replied that he does. Discussion ensued about these issues.