Corporate welfare aids profits, not jobs

September 29, 2005

States and municipal governments have long been in the habit of providing tax breaks and other incentives to employers who promise to bring jobs to their region. Often, the per-job cost to the state more than offsets any economic gain, and lost tax revenues lead to infrastructure problems down the road.

Corporate welfare encourages states to compete with each other to reach the bottom of the barrel. If Georgia offers a company $100 million to locate there, then Florida is likely to offer even more, thus starving schools and roads and police and fire departments of much needed revenue. And the resulting jobs are often low paying and not guaranteed – the companies and and do pack up and abandon their new communities on a whim.

Ironically, corporations rarely see incentives as deal breakers. Rather, they are often simply icing on the cake that companies routinely demand and receive even after deciding to move to an area regardless of any incentives.

Look to Tampa’s recent Whore Off victory for an example of how this all works. The city has promised the NFL over $11 million for one stinking football game, yet we can’t seem to find any cash to feed our homeless or school our kids.

Anyway, the Supreme Court has decided to look at a case form Ohio in which a sweetheart corporate tax deal was ruled unconstitutional, and “corporate relocation specialists” are going batshit trying to justify the legalized bribery that has become the norm.

Unfortunately, the usually perceptive St. Pete Times buys into the corporate welfare argument with hardly a murmer of dissent, offering only a token paragraph or two way down toward the end of their article to counteract the empty arguments of the pro-welfare crowd.

A case to be argued before the U.S. Supreme Court could bar state and local governments from using certain incentives to lure business jobs, Florida’s solicitor general warned Wednesday.

Chris Kise, author of a friend-of-the-court brief signed last month by Florida Attorney General Charlie Crist and 29 other state attorneys general, said a federal appeals court was wrong to rule unconstitutional an Ohio tax incentive that persuaded DaimlerChrysler Inc. to build a Jeep factory in Toledo. The U.S. Court of Appeals for the Sixth Circuit held last year that the incentive hindered free trade among the states by rewarding only companies that created jobs in Ohio.

If that decision were upheld, Kise said, Florida and other states would no longer be allowed to use tax-based incentives to lure or retain employers. Such a ruling would not only contradict prior Supreme Court decisions but hasten the stream of U.S. companies moving overseas.

Not really. Globalization is the root cause of the overseas job loss. Does anyone truly want to compete with third world call centers to offer the lowest wages and most corporate friendly tax base?

At the core of this scandal are corrupted definitions of “competition” that obscure cause and effect. We must create no-tax zones for factories, say the governors, to be competitive with other states – even though the whole country is bleeding manufacturing jobs and the obvious issue is globalization. We have to create a new TIF district (that’s “tax increment financing”) and steal shoppers from neighboring suburbs, say the mayors, to compete for tax base – even though malls in older areas are dying.

Those who peddle and those who buy into these corrupted definitions salute the corporate bottom line while thumbing their noses at common sense, social science, and good government. These corruptions are the deliberate creations of a 50-year campaign by corporations to divide and conquer the states – as well as the suburbs. This corporate gospel of competition preaches that governments at all levels must not be allowed to cooperate with each other. Public relations campaigns, consulting studies, lobbying of federal and state legislators, litigation all the way to the Supreme Court – companies will do whatever it takes, but governments must not be allowed to work together against the corporate assault. They must be kept in the dark and allowed into the room only when it’s time to talk about subsidies. Localities must compete for tax base by pirating jobs and retail sales from each other, even though this means chewing up farmland for wasteful sprawl and throwing away older areas, poor people, and past infrastructure investments.

At every level, this system demeans and degrades public officials: the economic development official forced to bid for an unknown company against unknown competing sites; the school board members who have no say in the property tax abatements that will corrode their budget; the revenue director whose sober advice is upstaged by the frothy projections of an economist rented by the Chamber of Commerce; the governor who overspends on a “trophy” project because she so fears being known as “the governor who lost us Mercedes-Benz.” Those who would dare to ask an impertinent question are quickly singled out for ridicule and isolation: they must be against jobs.

These blindfolded public officials practice job creation guided by wolves posing as Seeing Eye dogs. Companies, on the other hand, often know just where they want to go (or stay), but create a bogus competitor in order to “whipsaw” locations against each other and get more subsidies from the place they intended to go to all along.

A retired North Carolina construction executive who had used this scam admitted during a lawsuit deposition:

“I hate to give the example, but we decided very early in the game we were going to locate somewhere in the Winston-Salem/Greensboro area and narrowed it down to Kernersville rather rapidly; but spent a lot of time in Siler City and Asheboro and other communities hearing their story, primarily to use as a leverage to get all we could out of Winston-Salem. Now I give you that as a local example. But a more recent one – in Dickson, Tennessee, we had about ten west Tennessee municipalities chasing us with all kinds of offers; although we knew through the whole process it was going to be Dickson. And it was unfair and probably, as bad as it sounds, we used the others to get what we could out of where we were going in the first place. . . . you know, I’ve been around it a long time; but to me it’s the process. Usually, you know early where you are going, and you use your leverage.”

Get the whole story here.

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