07 Apr 2022 Disney, Florida, and the Folly of Special Business Exemptions

¹And then in the year of dread Wokeness the third, it came to pass in the Land of Dis, where Walt he begat him his line, ²but upon which in later days lay the rule of dark descendants not fit to command, ³there broke forth a haughty demand that the kingdoms beyond Dis contemn not the grown from speaking adult things unto babes in arms. ⁴Sayeth Chapek of Dis, the eighth of his line: even so must thou thine own children give over to worldly things; lo, though they yet sip at the juice box. ⁵The people did lament and say nay, even in their great legions. ⁶And so their kings and councils heard, and moved, and thus fell away from Dis the special anointments that these mighties had once bestowed. ⁷And therewith also were driven from Dis the foul Chapek, and his fellows, whom the multitudes judged woeful and dire stewards of things for the innocent young.

–        Book of Absurdicus, Chapter 36

Scott Shepard

We live in very stupid times.

Few have not yet heard about the growing disaster Disney has imagineered for itself. In response to some pressure from a loud and brash – but tiny – segment of Disney employees (but a segment used to getting its way on all occasions in recent years), CEO Bob Chapek put the full weight of the Walt Disney Company against a Florida public-school curriculum law. The law restricts teachers in such schools from initiating classroom discussions about sexuality or gender identity during the primary grades. In other words, it foreclosed sex talk to five- to nine-year-olds.

The law did not mention any specific sexualities or sexual identities; in fact, the law itself did not say gay, or any synonym of gay. Yet Disney followed the always-mendacious Human Rights Campaign in labeling this anti-grooming bill the “don’t say gay” law. Chapek called Governor DeSantis to threaten him, and to demand DeSantis’s surrender. DeSantis refigured General McAuliffe’s response to the Germans at Bastogne. Chapek promised to fight this sensible law, favored by all political affiliations and all ethnic groups, to the end of Disney shareholders’ resources.

And now DeSantis and other Florida lawmakers are threatening to revoke Disney’s independent-governance status, a bribe offered to the company to get it to locate Disney World in Orlando in 1967. Of course they are. As Chapek should have realized, a company that tries to intimidate a whole state into surrendering to its will on behalf of a radical minority – one that has campaigned against the state’s position with straightforward lies – isn’t likely to keep its special legal and regulatory exemptions for long.

Chapek’s stupidity should cost him his job; his whole cowed and somnolent board of directors should go with him. But the fault here doesn’t lie completely with that surly band of disastateers. Rather, the 1967 Florida legislature and then-Governor Claude Kirk, Jr., also bear some of the blame – for offering the special exemptions and privileges at all.

The reason is simple: Special perks for specific businesses or industries are bad for business, bad for government and bad for society.

Under the Reedy Creek Improvement Act, Disney was permitted to act as its own self-governing county. This gives Disney immense advantages, because it removes from Disney all of the taxation and regulation and interference that county governments create. These advantages have allowed Disney to grow larger and more powerful than it otherwise would have – and, incidentally, underscored just how costly and inhibiting local government is. At the same time, they’ve made Disney less liable for the costs of running central Florida than any other businesses in that area.

Fast forward half a century, and you get the current situation. Disney is an immensely powerful presence in Florida because of all the privileges and exemptions that attended its locating there – privileges and exemptions not offered to other businesses. And yet, because of those favors, it pays less than anyone else in order to exert that massive power. This combination raises its power-to-contribution ratio significantly.

This dynamic is then further exacerbated by the mismatch that it creates between Disney’s privileged interests and those of everyone else in Florida. Sensible businesses that seek success will want the legislature to constrain county governments’ taxing and regulating powers, because they understand that the higher the county exactions, the worse their businesses perform. But Disney has the incentive actively to seek more oppressive county government, as it does not suffer its depredations, and thereby increases its relative advantage when such government becomes more onerous.

Likewise, if it were governed by counties, Disney would be chastened in its threats to government and to the overwhelming will of the polity by concerns that the voters whose will it attempted to thwart might respond in kind at the next elections – voting in an anti-Disney slate. Given its exalted status, though, Disney could ignore such concerns, unless it acted so rashly as to bring about state-level anti-Disney majorities.

Chapek in his hubris may very well have done exactly that. Disney’s special status may be revoked – and bully for DeSantis and the Florida legislature if they do it. But let them also revoke all such special dispensations to specific businesses and industries, and initiate a constitutional amendment barring future governments from offering any further ill-considered bribes.

Let other states, meanwhile, learn from Florida’s example. As Georgia has recently found to its cost, industry-specific privileges backfire as spectacularly as company-specific ones. Georgia offered massive tax breaks to the film industry. As a result, more films are shot there than anywhere else in the U.S. This is celebrated as good for revenues, but that case is not at all clear. The special exemptions mean that the film industry is taxed less in Georgia than other industries, whose taxes must remain higher than they otherwise would be. So the exemptions only increase tax revenues if the film industry’s focus on Georgia is so overwhelming that its generation of taxes at the lower, privileged rates afforded to it alone is greater than the additional revenues that would have been achieved by the increase in business (and therefore in tax revenue) that would have occurred statewide if those special film-industry tax breaks had instead been spread uniformly and without favoritism over the whole economy in the form of general tax relief.

Meanwhile, the certain misfortunes created by the film industry’s special privileges have come vividly home to Georgia in recent years. Because Hollywood has become such a big Georgia employer, it has more power than in most other states to dictate – or at least to try to dictate – Georgia policy. And so Hollywood has leapt into the fights against Georgia abortion restrictions and against the state’s voting-integrity law, amongst others. Once again, an industry that is paying relatively the least to Georgia finds itself with relatively greater or greatest lobbying power in Georgia.

Then consider that offering any special business privileges creates the possibility that more will be offered. This in turn encourages companies to hire lawyers and lobbyists to try to get their own special exemptions. These expenses in aggregate are a deadweight loss: if companies knew that states did not, and because of constitutional limitations could not, offer special privileges, no one would seek them. Banning them would serve in effect as a significant tax break for every company doing business in the state. The ban would also radically decrease the opportunities for graft presented to elected officials.

Examples in support of this point are endless, and they arise at every level of government. And sometimes they’re initially not even obvious. Consider the inestimable business advantage internet (and then later social-media) aggregation platforms gained from the grant, by the 1996 Communication Decency Act, of section 230 exemption from the defamation laws that still applied, and apply, to other publishers. Without this privilege Twitter and Facebook would not be able falsely to label as “disinformation” materials that they lacked a legitimate, vetted reason to believe were false, rather than simply narrative-disturbing. Without this exemption these companies would not have grown so explosively, or grown so officious.

Many lessons flow from The Occurrence at Reedy Creek Bridge, and a beneficent karma would ensure that some of them will be retold when eventual (and, I hope, long-delayed) obituaries of Bob Chapek recount his downfall. The most important of these, if perhaps not the most obvious: Stop with the special business exemptions. For a people to be free and well governed, the laws must be uniform.