Powerful corporations get their way not only with the feds
States and localities also subsidize non-needy companies
How to get rich is a secret, despite our best efforts to disclose it: you privatize social values and socialize your private costs. The classic way to do that is to own land without paying any compensating dues (or tax) to your neighbors. Another example of making society’s goods yours is “corporate welfare”, the successful outcome of what economists call “rent seeking”. It’s a subsidy popular with both giver and getter. We trim and append three stories from clawback.org, a blog of Good Jobs First.
by Jeffery J. Smith, August 2008Illinois Bellies Up to the Bar with Beer Maker Subsidies
July 16, 2008 by Jeff McCourt
With substantial state and local subsidies, MillerCoors—the new joint venture that unites Miller Brewing and Coors Brewing—has announced it will locate its new headquarters and 300-400 employees in downtown Chicago. While modest compared to earlier Illinois mega-deals, the state and local incentive package promised MillerCoors is still substantial, ranging between $20.5 and $23 million or about $57,000 per job. Chicago’s competitors for the new headquarters were reportedly Dallas, Kansas City, Boston and Atlanta.
It appears that the hastily assembled package had a limited role in the company’s selection of Chicago. While acknowledging state and city’s support, company president Tom Long cited Chicago’s available labor and excellent inter-city travel connections as crucial to the decision to locate here. Another company official cited Chicago’s concentration of advertising and marketing firms, some already closely linked to MillerCoors.
And, when interviewed yesterday by a Colorado newspaper, MillerCoors CEO Leo Kiely couldn’t say how big the subsidy package actually was. He instead stressed that the location decision was driven by “the bias for a neutral city” that could mediate between the company’s production centers in Milwaukee and Golden.
These comments suggest that subsidies from fiscally hard-pressed state and local governments were a minor, even negligible factor in MillerCoors’ decision to put its headquarters in Chicago.
The Chicago Tribune’s print edition’s front page story on the deal had the upbeat headline, “Beer giant to locate in Chicago”; the on-line version had, “Beer tab too high for jobs?” The Tribune pondered whether an incentive package was even needed, given Chicago’s many economic and cultural assets. The story cites federal data showing high-paying corporate management jobs continuing to grow rapidly despite the Chicago’s loss of some headquarters.
Rhode Island Enacts Subsidy Disclosure!
July 8, 2008 by Greg LeRoy
Rhode Island passed two laws to shed light on subsidies.
In addition to web-based annual disclosure of outcomes for nearly every major economic development tax break, the new laws will mandate an impact analysis up front for every deal that must include details (including wages and benefits) about all kinds of jobs to be created (including part-time and temporary), the state’s level of subsidy, and how the project plans to maximize local hiring and minority hiring and minority firm contracting. The laws also mandate an annual Unified Development Budget, where all forms of state spending for jobs—including heretofore hidden tax spending as well as appropriations—will be reported to the state legislature.
The bills are: 2008 - S2661A, which was sponsored by Senate Majority Leader Paiva-Weed and others; and 2008 - H7953A, sponsored by several members of the House Committee on Finance. Congratulations to Rhode Island’s Poverty Institute and its many allies who raised the issue prominently this past January at their first-ever conference on tax policy; it was well attended by activists and legislators alike.
Reality Check Arrives at Ground Zero
July 3, 2008 by Bettina Damiani
New York Gov. Paterson has asked THE tough question about the redevelopment of the 16 acres at Ground Zero by requesting (gasp!) an assessment. Paterson’s willingness to confront the challenges of the rebuilding (and one of the worst kept secrets in town) are a breath of fresh air and include: the unmanageable size of the project, the “unique interdependencies” (I guess that’s the nice way to say political interests), increased costs and the “doh!” moment was “lack of an effective decision making process.”
Of course the decision making process was ineffective -- in large part because it was unaccountable. GJNY and others cautioned early on and regularly that unless transparency and accountability were improved in Lower Manhattan, the development could have a negative impact -- mostly on low and moderate income residents and workers. We weren’t wrong (unfortunately) as billions of dollars in Federal resources were allocated in Lower Manhattan to financial firms and luxury housing developers helping to make it one of the city’s ritziest neighborhoods.
The head of the Port Authority, Chris Ward, deserves credit for giving the Governor an honest critique of what has become an embarrassment.
JS: To be the one to decide how to spend public revenue -- which historically was land rent -- was and is the prize of public office, whether via election or revolution or conquest. It is the central function of the state. Yet citizens might become willing to perform that function for themselves when what they pay into the public treasury is the value of the land they own. Rather than let politicians spend something so precious, owners would pay in land dues (or taxes) while citizens in general would get “rent dividends” back, instead of special interests getting subsidies.
Jeffery J. Smith runs the Forum on Geonomics.
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