A few weeks ago Amazon decided against putting a new corporate headquarters facility in Queens, New York. Media mega-star freshman congresswoman Alexandria Ocasio-Cortez (D-NY), an outspoken critic of the $2.5 billion tax break being offered, was blamed for the loss of new jobs Amazon promised. Her motivation for opposing the tax incentive was pretty fuzzy.
“If we were willing to give away $3 billion for this deal, we could invest those $3 billion in our district ourselves, if we wanted to. We could hire out more teachers. We can fix our subways. We can put a lot of people to work for that money, if we wanted to,” Ocasio-Cortez said. – FoxNews 2/20/19
AOC, who claims to have a degree in economics, could not grasp the difference between spending existing tax funds and foregoing future tax income.
But I agree with her ultimate aim. I think it’s crazy for cities all over the country to prostitute themselves to the ‘next big thing’ with tax abatement bribes.
It’s not that I believe corporations should pay more taxes, or that reducing taxes is a bad thing. But giving big local tax exemptions to companies who relocate or build new operations just doesn’t make economic sense. Here’s why.
• Local taxes always go up, they never go down. Most of the tax abatements offered to these corporations are reductions in property tax and reduced or free infrastructure cost assessments – streets, utilities, fire stations, etc. All of the costs that were there before the newcomer arrived are still there, plus more. And those costs will be borne by the same local taxpayers who have been footing the bill all along while the new corporation skates.
• Favoring one company over others always screws up the free market. Proponents of tax abatements always justify tax incentives by saying, “If we don’t do it, somebody else will”. So what? Does it harm your city if another city gets a new employer? And are these really new jobs? Isn’t the new company just cherry-picking the good employees already in the local market, leaving their previous employers to find and train new ones? And employees who move to the area for the new jobs will no longer be paying taxes back home, leaving a dent in that economy.
• These deals are often “too good to be true”. It’s not unusual when the new company doesn’t hold up its end of the deal. Promises of thousands of new jobs fall woefully short (FoxConn). Long-term agreements get cut short(Chiquita). And the federal government is no better at corporate welfare than local governments (Solyndra).
My South Carolina county is abuzz this week with word that the Carolina Panthers are considering moving their corporate office and practice facility across the state line to the ‘burbs. Hmm, you don’t suppose they want something in return? And how should Charlotte residents feel after pumping millions of tax dollars into the Panthers’ stadium?
Back in the 80s I was CFO for a locally-owned chain of lumber yards and home centers. My company employed hundreds of good, hard-working taxpaying employees, paid tons of local taxes, and contributed to countless local charities. Then one day the first of the big-box home centers announced it was opening in our city, thanks to a boatload of local tax incentives and up-front benefits. We lost a number of good employees, whom we had trained and nurtured, for a buck or two an hour pay increase. Turns out the new store hired three times as many employees as they intended to keep so they could pick the best of them and dump the rest. They low-balled prices for a few months to entice new customers and then jacked them back up later when nobody was looking. Oh, and yes, the new company was out of business a year and a half into their five-year commitment to the city.
So Congresswoman Alexandria Ocasio-Cortez is actually right. We should not subsidize corporations with public money. When our government picks winners and losers, the taxpayers always seem to be the losers.
Soy un perdedor
I’m a loser baby so why don’t you kill me?
(Get crazy with the Cheeze Whiz)