Despite their promises, Idaho politicians can’t deliver affordability | Opinion
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- Idaho’s targeted tax breaks attracted firms but distorted market price signals.
- Selective incentives shifted tax burdens, encouraged rent-seeking and reduced efficiency.
- Author urges tax code simplification and trust in price signals to restore fairness.
It may not get listed in the dictionary as a new word for 2025, but affordability should be recognized as overused.
The so-called “affordability crisis” many policymakers are talking about is likely a product of their own doing. Past policy mistakes are why prices are not where these officials think they should be.
In 2014, I argued on these pages that Idaho’s strategy of offering tax breaks to lure businesses was misguided. The economics is simple: corporate tax breaks rarely produce sustainable economic growth because they distort the natural price signals of the market.
A decade later, economist Ryan Bourne’s explained the broader principle that when governments manipulate prices, whether through subsidies, controls, or selective tax breaks, they undermine the very information that markets need to function. In his 2024 book, “The War on Prices: How Popular Misconceptions about Inflation, Prices, and Value Create Bad Policy,” Bourne demonstrates how prices communicate scarcity, costs and trade-offs.
When policymakers intervene to “fix” market outcomes they often create inefficiencies and unintended consequences. Idaho’s experience over the last ten years proves the case. We see more employers and their workers moving here in response to the targeted tax incentives, but the unemployment rate has changed little while the inflation rate rises.
Tax incentives amount to favoritism, benefiting a few firms while shifting the tax burden onto others. Such market distortions reduce transparency, encourage rent-seeking and spark harmful competition among states. Every dollar spent on incentives is a dollar not invested in broad-based tax relief or public goods, like roads, that serve all citizens.
It raises the bigger question of justice. Selective tax breaks compromise fairness and honesty, eroding trust in both markets and government. The better and more just path is to simplify the tax code and let markets allocate resources efficiently. Idaho should trust price signals and thereby promote genuine growth.
When we wage war on prices, we create an affordability crisis.
Peter Crabb is a professor of economics and the director of the Center for the Study of Market Alternatives at Northwest Nazarene University in Nampa.