A Thin Line: Economic Development Or Corporate Welfare?

[one...two...tree 2,762]

In her new series for The New York Times called "The United Statesof Subsidies," investigative reporter Louise Story examines how states, counties and cities are giving up more than $80 billion each year in tax breaks and other financial incentives to lure companies or persuade them to stay put.

The states and localities want jobs and economic growth; the companies want free land, free buildings, property tax abatement, "anything you can think of that would be financially beneficial," Story tells Fresh Air's Terry Gross.

The companies, she says, know they can getwhat they want, which is why they ask, and officials are so afraid to risklosing a current or prospective local employer that they readily comply.

"The beneficiaries come from virtuallyevery corner of the corporate world," she writes in the series. However,the rewards from the incentives are difficult to calculate, Story writes,because job growth as related to incentive packages is rarely tracked.

And yet, Story tells Gross, "I don'tthink you'll find a company out there that has not received financialincentives from local government."

As Dale Craymer, president of the Texas Taxpayers and Research Association, says to Story, the question is: "When does economic development end and corporate welfare begin?"

Interview Highlights

On the bidding war forbusinesses in Kansas City

"Kansas City, it's right on the border ofKansas and Missouri, and what's been happening is that Kansas will offer tocompanies who are in Missouri to come over and they'll give them tax credits. [Kansas has] a very big ...tax credit called the PEAK Program, and Missouri will match it. ... Iinterviewed both governors, Gov. [sam] Brownback from Kansas and Gov. [Jay] Nixon,and I actually asked them why they did this. There are local business leadersin Kansas City who have called on those two governors to agree to a truce, toagree to not give incentives to companies who are just moving across theborder, and I asked both Gov. Brownback and Gov. Nixon, 'If the other one wouldagree, would you agree to stop this?' And neither would."

On the impact ofincentives on Texas schools and publicservices

"Texas schools have hadtheir budgets dramatically cut in the last couple years. They lost $5.4 billionin the last legislative cycle. By the time they lost that money, Texas was already spendingthe 11th least amount per student in the country. So, they're already at thebottom of the heap on what they spend per student and they cut it further. ....

"It's a little difficult to talk aboutexact causality, because ... the general fund of a state is like a big bowl ofthe water. ... You pour a little out on one side, well, which part of theglass, or which part of the bowl, did it come from? It's a little hard to say,but certainly this amount of cash out the door in Texas, and forgone taxrevenues but through different incentives they have and tax breaks, is moneythey don't have at a time they have been cutting the school budgets."

On the beginning ofincentives in the film industry

"Canada started recruitingsome moviemakers away from New York and L.A., and Louisiana took a look at thatand said, 'Oh, wow, Hollywood will go for money?'And Louisiana created a verylucrative program offering a 20 percent rebate on what movie companies spendthere, and movies started going to Louisiana. And when otherstates saw that they said, 'Oh, wow, we should offer that too.' ... And so thenwhat happened was New York and L.A. — where it used to beclear that people would want to shoot movies — they had to create their ownprograms to convince moviemakers not to move."

On what happened to the places that had agreed to the financialincentives after GM went bankrupt

"A lot of other places, like Moraine,Ohio, and Janesville, Wis., were not as lucky and, in 2009, as part of thebankruptcy, the company left a bunch of properties behind in what became alegacy GM, an old GM, and ... the company actually is a new company and it doesn'thave the obligations to those old properties, and those properties are beingsold now very slowly. There were local officials in states and cities tied toabout 50 of those properties that had given incentives and they were dismayedwhen they saw [this and thought], 'We gave you this money to help with jobs andnow you're leaving.' "

Listen to the entire interview here.

Edited December 6, 2012 by Lincolns mullet

[Mr. Big Dog 10,747]

Hillsborough County, FL is right now looking at $8MM worth of subsidies for a Bass Pro store that will kill who knows how many small businesses on the east side of Tampa. The pinnacle of stupidity.