Wichita reviews tax incentive policies Tuesday, July 27, 2004 Wichita is reviewing its tax incentive policies, and from the looks of it, the review is about due. The City provided tax incentives to a local health club to expand. Read more. The deal violates one of the basic rules of economic development: not all businesses are created equal. Sheltered businesses -- firms that survive on local customers -- do not create long term wealth. We generate wealth from traded businesses that conduct business outside our regional economy. So, giving tax incentives to health clubs redistributes wealth (from taxpayers to owners of health clubs), but it does little to generate any net benefits for Wichita. In most economies, about one third of the employment is in traded businesses. These firms generate higher wages, and they represent the economic drivers of the economy. You can think of it this way. In economic development there are three types of money. "Good money" comes from selling goods and services outside the economy and importing income. "Neutral money" comes from businesses that circulate money within the economy. Hardware stores, retail shops, and health clubs all deal in neutral money. "Bad money" represents funds that we send to outside suppliers. This is money that has leaked out of the economy. David Morganthaler a noted venture capitalist and close adviser to REI, provided me with this quick explanation. posted by Ed Morrison |		This work is licensed under a Creative Commons License. links Some Background on EDPro Weblog The purpose of this weblog is to help economic development professionals -- EDPros -- keep up with the changes sweeping our profession. Strap on your goggles. It's a whole new game. There are no experts any more. The only place to learn about economic development is from other EDPros who are doing it. One other point: the prevaling approach (paradigm, if you like) in economic development is shifting from competition to collaboration. There are a lot of reaasons underlying this shift, but here's the important insight: You, your community, and your region will do better by collaborating and sharing information. So, spread the word...Share the knowledge. Tell a friend about EDPro Weblog. If you are using a news reader, here is the link to syndicate this site: Here's the link if you are a bloglines subscriber: Speaking and workshops on Open Source Economic Development As the idea of Open Source Economic Development starts spreading, more people are asking about it. Visit the I-Open web site to learn more. My colleagues and I are happy to explain the basic concepts in a talk or a workshop. E-mail Susan Alshuler if you'd like to learn more about workshops and speaking. Background on Ed Morrison Download some background information on me here.

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