The whole business of giving tax breaks to businesses to
lure them to a particular place is largely a scam.
Sure, I’ll move
My business here;
Whisper tax breaks,
In my ear.
My business here;
Whisper tax breaks,
In my ear.
There’s a certain
political irony surrounding WWE, that unrivaled producer of violence and
misogyny for fun and profit. As a significant employer with 700 workers here in
otherwise dowdy Connecticut, the outfit formerly known as Worldwide Wrestling Entertainment has already collected $37 million in state tax credits, with more in the
pipeline.
This state largesse has added mightily to the company’s profits, nearly $100 million of which funded two losing U.S. Senate campaigns by its former CEO, Linda McMahon. In her failed 2010 and 2012 bids to become a lawmaker, by the way, she claimed to oppose corporate welfare.
Other tycoons are more
honest. Throughout our nation, savvy businesses snooker grants, tax credits,
exemptions, forgivable loans, free buildings, subsidized training, and other
perks from gullible states and cities. Those governments think that without
these gifts employers would move elsewhere. Well, sometimes that’s true, but
mostly not. The whole business of giving tax breaks to businesses to lure them
to a particular place is largely a scam.
The obvious overriding
flaw in this bribery system is that if Town A gains a new business from such
giveaways, Towns B, C, and D lose out. It’s a zero-sum game. Overall, the
company profits while society pays. Recently the Bridgewater hedge fund wheedled a deal from Connecticut’s government to pay it some $100 million to
build its new corporate headquarters in Stamford, three towns down the coast
from where it is now. Where else was it going to go, Bangladesh?
No, Bridgewater needs
to be near Wall Street. So, OK, maybe it could move to New Jersey or New York.
What we plainly need is not this ongoing bribery competition, but an interstate
compact or a federal law making it illegal to subsidize employers to settle in
a particular town or state. Let them settle wherever they otherwise think is
best, using their own money.
Worse still, some of
the biggest bribes nationally go to large corporations to relocate from the
North to the South so they can replace their unionized workforce with non-union
workers. Not only do these factories collect subsidies to move, but they’re
also getting taxpayer dollars to make it easier for them to chisel away at
their workers’ security.
The cure for this
abuse is federal legislation giving workers equal rights to organize anywhere
in the country. It would also help if Uncle Sam could prohibit the use of
public money to corrupt the process of selecting a site to locate a factory or
corporate headquarters.
There’s probably no
way to end our basic inter-town and interstate competition for jobs and tax
revenue, but it could be made a lot more beneficial. The idea would be to steer
this battle for tax base into healthier channels.
Suppose, for example,
that cities competed on the basis of the quality of their schools, or the
efficiency of their transit, or the beauty of their parks, or the diversity of
their housing? Such public services improve the well-being of citizens and
employers alike.
As it is,
unfortunately, today’s competition is notably less elegant than that. One
“family fun center” in Norwalk, my hometown, just received a grant to upgrade
its laser tag equipment. Upstate, an entrepreneur recently collected $100,000
in state funding to create new paintball battlefields. Instead of being tarred and feathered, maybe the officials who
granted these giveaways should be lasered and paint-balled.
OtherWords columnist
William A. Collins is a former state representative and a former mayor of
Norwalk, Connecticut. OtherWords.org
