Giving Away the Store
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.
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 dealfrom 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.