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December 12, 2013
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As the nation turns its attention to the latest federal budget deal
where curtailed spending and cuts are the defining principal, a dozen
blue and red state governors are in a bidding war recklessly offering to
spend billions for tax breaks and other public-paid subsidies
to lure the corporate giant Boeing to build its next-generation aircraft
factory.
Beyond the schizophrenic spectre of congressional negotiators saying no to spending as governors are
offering
mountains of cash is a maddening reality: these taxpayer subsidies do
not create the promised jobs or investments, a series of striking
academic studies have found. All they do is boost bottom lines by
cutting corporate costs.
“Economic development officials value business tax incentives as tools needed to compete with other states,” a November
report
commissioned by New York State’s Tax Reform and Fairness Commission
began, stating their presumptive selling point. “There is, however, no
conclusive evidence from research studies conducted since the mid-1950s
to show that business tax incentives have an impact on net economic
gains to the states above and beyond the level that would have been
attained absent the incentives.”
The 143-page study,
produced
by Marilyn M. Rubin of John Jay College and Donald J. Boyd, the former
director of the Rockefeller Institute of Government State and Local
Government Finance research group, was not alone in this conclusion.
“We
estimate the impact of manufacturer business taxes on value added
during the 1990s for 15 manufacturing sectors in 20 U.S. states,” began a
National Science Foundation
report
published this past June. “When we isolate the value of industrial
incentives from the basic tax system in our theoretically preferred
marginal tax measure, we find… only 1.2 percent industrial growth, the
latter elasticity not statistically different from zero.”
Zero.
Think about that. Right now the federal government is curtailing
spending on a vast array of needed initiatives—from social safety nets
to next-generation weather satellites. And in state and local
government, which is the frontline for services and will face the
consequences of federal budget cuts, yet another corporate giant is
seeking and being offered billions—even as experts say those subsidies
are worthless for creating jobs.
“When combined with many previous
reports, the Rubin and Boyd [New York State] study shows that state and
local giveaways to corporations simply redistribute wealth upward
without increasing jobs,”
wrote David Cay Johnston, a former Pulitzer Prize winning
New York Times
taxation reporter for TaxAnalysts.com. “Their continued existence is a
testament to the benefits of being politically connected.”
The national cost of “being politically connected” was estimated at $80 billion annually, the
New York Times found
last year after investigating the “incentives [that] are given by
states, cities and counties to companies that often pit local officials
against one another to get the most lucrative packages.” Kenneth Thomas,
a University of Missouri-St. Louis political scientist, estimated that
cost was $70 billion annually, Johnston
noted.
Boeing’s bidding war is the latest high-profile example of this corporate extortion racket.
It
threatened
to leave Washington and build a new factory for its next-generation
777X jet—which has $95 billion in orders—after a key union, the
International Association of Machinists and Aerospace Workers, refused
to accept a freeze in members’ pensions.
That prompted Boeing
executives—who moved their headquarters to Chicago a decade ago after
another interstate bidding war—to say that it was looking for greener
pastures. Washington’s legislature convened a special session and
adopted a package of subsidies worth $8.7 billion through 2040. Missouri
put together a package worth $1.7 billion.
The
St. Louis Post Dispatch got a copy of Boeing’s
wish list,
which was supposed to be confidential. It included free land, free
facilities, free worker training, access to roads, railways and special
runways, and all possible tax breaks. “Entire applicable tax structure
including corporate income tax, franchise tax, property tax, sales/use
tax, business license/gross receipts tax and excise taxes to be
significantly reduced,” it said.
The nation’s political elite
doesn’t want to hear that coddling corporations is a ripoff—and the
public’s money could and should be more wisely spent elsewhere. In
Congress, supporting for legitimate public needs has become an
unforgiveable sin in the eyes of rightwing Republicans in both chambers.
Meanwhile, pro-corporate Democrats also support unneeded corporate
largesse, as seen by the pathetic offers to companies like Boeing
coordinated by governors such as Washington’s Jay Inslee, a Democrat.
The corporate subsidies study commisioned by New York’s
Democratic Gov. Andrew Cuomo was apparently not what the governor wanted
to hear, Johnston
reported.
It was not merely shelved, but Cuomo’s response to the corporate
subsidy report was to appoint a new tax reform commission, “and made no
mention of eliminating the tax credits so thoroughly dissected by Rubin
and Boyd,” he wrote. “The implication being that not having gotten what
he wanted, Cuomo is trying again for a report made as
instructed—although only time will tell.”
Meanwhile, across the
country, there is little evidence that government is slowing the
movement of taxpayer resources toward the top. The newest federal budget
deal doesn’t raise taxes on the wealthiest people or institutions.
Instead, it
cuts
services for the middle-class, poor and eats away at federal workforce
pay and benefits, according to an early analysis by the Washington-based
Center for Budget and Policy Priorities.
At the state level, GOP governors—some of whom have
blocked
Obamacare and denied access to proactive care for their poor by
refusing federal funds to expand Medicaid, such Alabama and North
Carolina—were “putting together bids [for Boeing]… bragging about their
respective environments of can-do optimism,”
The New York Times reported.
This
schism—Congress curtailing spending while states bend over backwards to
offer the latest corporate giant everything it wants—shows the power
and reach of government. If only that “can-do” attitude was put to work
to cultivate economic security for millions of struggling American
households, instead of for a wealthy corporation that’s
evaded taxes and
reported billions in profits for years.
Steven Rosenfeld covers
democracy issues for AlterNet and is the author of "Count My Vote: A
Citizen's Guide to Voting" (AlterNet Books, 2008).
