Magazine article Government Finance Review

Addictive, Expensive, Dangerous - 'The Great American Jobs Scam'

Magazine article Government Finance Review

Addictive, Expensive, Dangerous - 'The Great American Jobs Scam'

Article excerpt

Call it, if you will, the crack cocaine of state and local governments' economic development practices - their endless flow of tax breaks and outright gifts to private corporations they want to land, or figure they have to pay off to stay put.

Today the practice runs so deep, pervading such a huge number of corporate location moves, that officials - those who privately admit it's an insane, zero-sum system - keep on forking out the cash, no matter how incredibly costly the addiction.

For years Greg LeRoy has been America's chief whistle-blower on the subsidies, which he now estimates add up nationally to an eye-popping $50 billion a year. LeRoy's just-published book, The Great American Jobs Scam (Berrett-Koehler) tells the story in full and colorful detail.

There's the story of how Raytheon, threatening to move defense operations out of Massachusetts in the '90s, got the Legislature to give it tax breaks of some $21 million annually - and then proceeded to reduce its Bay State payrolls by 4,100 people, or 21 percent, anyway.

In New York a few years ago, Mayor Rudolph Giuliani offered $940 million to keep the New York Stock Exchange and its 1,500 jobs in town - even though many of its member firms had already been subsidized to stay in Manhattan.

The payoffs continue. North Carolina, for example, recently offered Dell, one of the nation's most successful technology companies, $225 million in tax incentives over 15 years to bring 1,500 jobs into the Piedmont Triad area.

When Los Angeles was hit by aerospacedefense cutbacks and civil disturbances in the early '90s, economic development officials in a dozen Western states, like sharks sensing blood in the water, mounted aggressive job-piracy efforts to capture L.A. industries with public subsidies.

As for Wal-Mart, the world's biggest corporation, LeRoy has totaled up more than $1 billion it has received from municipalities in brick-and-mortar subsidies for its stores and warehouses - which end up throwing Main Street merchants out of business and feeding the sprawl machine that befouls our air and drives up government costs.

A good chunk of the payoffs to Wal-Mart, Home Depot, Target et al., LeRoy reports, are based on enterprise zone and "tax increment" district financing that were originally designed for lagging older cities, but are now turned into subsidy machines to eviscerate historic communities even further.

So what's to be done? First, says LeRoy, "disclosure-disclosure-disclosure;" when the public is informed, the jobs blackmail diminishes. Then set up "clawback" recapture provisions when a subsidized firm doesn't fulfill its job-producing promises. …

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