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States, counties and cities are providing over $80B in incentives a year to companies to locate...

States, counties and cities are providing over $80B in incentives a year to companies to locate to their areas, the NYT finds in an investigation of over 150,000 awards. However, municipalities don't know if they're getting their money's worth, because they don't often track how many jobs the firms bring. "It's really not creating new jobs," says Hallmark CEO Donald Hall.
Comments (8)
  • Governments are tied to geography, while companies aren't.

     

    People need to stop drinking the koolaid of "attract business and then [magically] good things will happen", and start doing the real math.

     

    "Business friendly" countries, states, and municipalities are friendly to the business /owners/ but make no requirements for those owners to be equally friendly to local business employees.

     

    Look at every tax haven out there: few are booming with jobs and other forms of prosperity for their residents.

     

    Nevada is 'home' to many companies, but yet it is still #1 in unemployment (http://1.usa.gov/TDc8kO).

     

    Ireland is a great international tax tool, but their unemployment is hovering near 15% (http://bit.ly/11kEiYa).

     

    Many often preach about the unfairness of government toward business, and yet the facts often paint a picture of the reverse.

     

    What could be a healthy, synergistic relationship between the public and private entities, has instead become a very lopsided venture, where the public gets shafted and business (owners) get sweetheart deals.
    2 Dec 2012, 08:18 AM Reply Like
  • Typically the concessions offered include tax breaks and subsidized financing. So taxpayers wind up paying for the largesse.

     

    As an Olin (OLN) shareholder, I watched in wonder while the company used subsidized offers from Mississippi in an attempt to force the union where their plant was located to make wage concessions. The union refused, and the plant is in the process of being located, to a nice new facility in Oxford, Mississippi.

     

    I once worked for an outfit that was subsidized by the state, based on creating jobs. The jobs created were such that the local citizenry wouldn't take them, so the result was they brought in hundreds of illegal immigrants. Great public policy, subsidize illegal immigration.

     

    The gratitude of the owners was such, they spent a year jetting around the country, looking to find a better deal elsewhere.

     

    The onus lies with local voters, to keep an eye on your politicians.
    2 Dec 2012, 08:55 AM Reply Like
  • Tom,
    These states and cities need to "get smart". All these tax breaks and corporate giveaways are just a form of investment wherein the taxpayers get zero in return for the investment. What needs to happen is for the states and cities to start getting something in return (eg. shares or percentages of equity or ownership stakes) in return for the tax breaks or cost savings that accrue to corporations, executives, and shareholders..

     

    Unfortunately the "local yokels" are not on the same level of expertise with the corporate vultures who have significantly more resources, more expertise, better information, and the ability to easily play off one jurisdiction against another.

     

    Our suggestion is for some smart private entrpreneurs (Accenture, McKinesey, or others) to set up a special consulting venture to come in and advise state and local governments on negotiations with business for tax breaks, cost savings, etc. The only criteria being that such consulting to be on a contingency fee basis only. For example 5-10% (by bid) on the value of the investment received by the state or local (eg. shares received) in relation to the value of the tax breaks, costs incurred, etc. by the governmental agency.

     

    Time to start using the private sector and start playing off one area of the private sector against another area of the private sector to maximize the benefits to taxpayers as a whole. Maybe even some type of federal incentive to encourage states and locals to optimize tax giveaways and cost breaks. For example, loss of 1/2% of federal grants and transfer payments for any state or local that does not use the contingency fee consultants to maximize investment received for taxes and costs given up. Something needs to be done to equalize the playing field as advantages have just shifted much to far in the direction of especially larger multinational corporations. And they certainly have been masters at exploiting it to significant advantage.
    2 Dec 2012, 01:02 PM Reply Like
  • No different than local and state governments spending billions to build new sporting venues for greedy owners. Just a waste of taxpayer money.
    2 Dec 2012, 10:36 AM Reply Like
  • Bread and circuses....
    2 Dec 2012, 12:33 PM Reply Like
  • In Ct., our Gov. Malloy has made offering tax brakes for jobs the cornerstone of his administration...along w/the biggest tax hike in history. Alas, in his Democratic wisdom, he didn't try to attract new jobs, just doled out millions to companies already here. Now it seems even w/that tax hike his budget is hundreds of millions in the red. Of course here, our 47% is more like 65% so such stupidity will only be rewarded.
    2 Dec 2012, 12:05 PM Reply Like
  • Beggaring thy neighbor doesn't create jobs.
    2 Dec 2012, 01:46 PM Reply Like
  • A few points:

     

    1. Capital is mobile while geography is not and that makes this an asymmetrical negotiation.
    2. I would not have politicians negotiate anything as they don't have the math skills or business skills to enter in a good deal with anyone.
    3. If they do have the skills they don't care anyways because they just want to buy votes.
    4. They look at these places as a place to land in the future quite often. Quid pro quo with a time delay.
    5. They do these deals because they don't know any other way to get jobs which shows how pathetic they truly are.
    6. The most effective way to build business is from learning centers outwards. That is colleges and universities and high schools for that matter. However politicians cannot take credit as easily because that is not a deal.
    7. Governments have to learn to compete without giving away money which is their favorite and easiest approach.
    2 Dec 2012, 03:04 PM Reply Like
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