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According to Center on Budget and Policy Priority data cited by Louise Story, in 2011 the states enacted $156 billion of austerity measures, between budget cuts and tax hikes. Despite their budgetary woes, however, this did not stop them from throwing billions of dollars a year into the worst kind of corporate subsidy, relocation incentives that move existing facilities from one state to another without creating any new jobs. A new report from Good Jobs First documents their widespread use, which is far more common than most people would imagine.

One great aspect of this report is that it goes beyond the two examples of interstate border wars we hear the most about, New York-New Jersey-Connecticut and Kansas-Missouri. We learn about Texas and Georgia vs. the world, North Carolina-South Carolina (especially in the Charlotte metro area), Tennessee-Mississippi (particularly with Memphis as target), and Rhode Island-Massachusetts. In addition, we learn more about the flip side of job piracy, retention subsidies, of which Sears' two in Illinois are the most egregious.

For example, Continental Tire moved its North American headquarters and 320 jobs from Charlotte to Lancaster County, South Carolina, in 2009. Georgia gave Ohio-based NCR Corp. (formerly National Cash Register) $109 million to relocate that same year. In 2010, Hamilton Beach received at least $2 million to move from Memphis to Olive Branch, Mississippi, while in 2009 McKesson received $4 million from Mississippi in addition to local incentives to move from Memphis to neighboring DeSoto County. Rhode Island, in a widely publicized move, gave Boston Red Sox pitcher Curt Schilling's video game company 38 Studios a $75 million loan to move from Massachusetts in 2009, only to see the  firm go bankrupt in 2012. There are many more examples in the report, but you get the idea.

The existence of relocation subsidies makes it possible for companies to demand incentives to stay in a particular state, i.e., retention subsidies. Two of the three largest ones went to Sears in Illinois, $168 million in 1989 and another $275 million in 2012 when the 1989 deal expired. The second largest was $250 million to Prudential Insurance from New Jersey in 2011. But many more states have had to shell out retention subsidies on a regular basis.

The report notes that at least 40 states know how to write no-raiding language into their subsidy programs, because they already have such language banning intra-state relocations from receiving subsidies under various programs. However, as far as I know, far fewer states prevent their cities from giving relocation subsidies to in-state firms, though the report shows that Maine's Employment Tax Increment Financing rules do provide that.

What is necessary, the report argues and I wholeheartedly agree, is that states need to tweak their program language to stop rewarding interstate job relocation as well. They need to stop efforts to directly poach existing firms, something Texas is heavily engaged in. The report says there is a "possible" federal role here, to withhold some Department of Commerce monies from states that engaged in job piracy. I, on the other hand, think that federal action is the only way it will happen. As I've written before, voluntary state efforts in the 1980s and 1990s to end job piracy have been utter failures, and the states clearly need an outside enforcement mechanism, which can only be provided by the federal government.

With such extensive documentation of how widespread relocation and retention subsidies are, hopefully more people can be mobilized to get the federal action we need.

Originally posted to Kenneth Thomas on Tue Jan 29, 2013 at 08:56 PM PST.

Also republished by In Support of Labor and Unions and Community Spotlight.

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Comment Preferences

  •  NYT did a three section report (14+ / 0-)
    An examination into corporate incentives that has become standard operating procedure for state and local governments across the country, the New York Times takes a special look at Texas in: Lines Blur as Texas Gives Industries a Bonanza, and presents some startling numbers of of tax breaks and subsidies fostered by Rick Perry and his gang to corporations at the cost of limiting basic services to Texans. That article is worth a total read as it names names and connections.
    Devoting one section to Texas due to the insane corporate recruitment, a hallmark of Perry's administration.

    Be the change you want to see in the world. -Gandhi

    by DRo on Wed Jan 30, 2013 at 02:05:27 AM PST

    •  Texas is crony capitalism at its worst (4+ / 0-)
      Recommended by:
      DRo, JerryNA, SilentBrook, Laconic Lib

      Even the Wall Street Journal wondered if Perry had a "crony capitalism problem" during the Republican primaries.

      The Times series raised awareness of this issue a great deal. The subsidies totals are flawed because sales tax breaks are only very rarely a subsidy, but Richard Florida has written that the correlation between states' total subsidies per the Times and their totals without the sales tax breaks is 0,82, which is very high, and Texas remains highest even without sales tax breaks included.

      Story's Texas article does a great job documenting the "pay to play" ethos of Texas subsidy seekers.

  •  Can this be made illegal for Stats todo? (6+ / 0-)

    I can only image those dollars would have been more effective creating jobs or insourcing them from china then state to state moving games.

    This would fall under the commerce clause for being interstate commerce yes?

    •  The whole war should be made illegal (10+ / 0-)

      but the Supreme Court threw out the Sixth Appeals Court decision in Cuno v. Daimler-Chrysler that said some state subsidies violate the Commerce Clause.

      However, even if had been upheld, a bipartisan group of Midwest Senators was ready to introduce legislation to overturn it, and it would surely have passed. This is covered in the Good Jobs First report.

      But it's much easier to get people to agree that relocation subsidies are bad policy, because the jobs aren't really new, and claiming they are is dishonest. So this looks like the best available point of attack  to get some federal regulation.

      The New York Times series has raised awareness of this issue a great deal, so now is the time to be calling your Senators and Representative.

      •  call your Governor's offices, too (5+ / 0-)

        That's where the bribes are given and taken.  Excuse me, I believe that "incentives" and "campaign contributions" are the technical terms, but bribes is the word we common folk use.

        •  This is a job for Big Federal Government. (2+ / 0-)

          Congress should pass a law making it illegal for states to offer tax breaks or expenditures of public dollars [but see below] to lure jobs from other parts of the USA.

          What about jobs from other countries getting state or federal breaks? I dunno. Frankly not sure about that. Leaning against.

          The expenditures of public dollars part is hard to define. F'rinstance, sometimes a state will say to MegaCorp, if you build a big factory on this site next to the interstate highway, we'll spend $ millions to build an adjacent exit. And we'll incorporate training for your work processes into our local tech school's curriculum. Those things seem legit. It really is the job of government to meet the needs of the local community.

          But what about building a new stadium for the football team? I'm against it. That doesn't create new jobs; it just shifts entertainment jobs away from movie theaters and restaurants and camping-supply stores and other recipients of leisure income.

          "The true strength of our nation comes not from the might of our arms or the scale of our wealth, but from the enduring power of our ideals." - Barack Obama

          by HeyMikey on Wed Jan 30, 2013 at 01:38:10 PM PST

          [ Parent ]

  •  A race to the bottom without globalization -- (19+ / 0-)

    I had not thought much about that. These same states are laying off teachers and police and cutting all kinds of social benefits. If they wanted to the states could cooperate and all flat out refuse to pay these bribes.

    We have only just begun and none too soon.

    by global citizen on Wed Jan 30, 2013 at 05:32:01 AM PST

  •  Very insightful (5+ / 0-)
    Recommended by:
    Wino, Kenneth Thomas, DRo, JerryNA, SilentBrook

    I hadn't thought about the idea that states are trading austerity for corporate subsidies.

    I would like to see this meme gain traction. Thanks!

    "Let us not look back to the past with anger, nor towards the future with fear, but look around with awareness." James Thurber

    by annan on Wed Jan 30, 2013 at 06:28:32 AM PST

  •  It's blackmail. Or extortion. I can't remember (3+ / 0-)
    Recommended by:
    Ozzie, nchristine, Laconic Lib

    the difference, but it's definitely one or the other.

  •  Can't understand (8+ / 0-)

    why this is not treated as out-and-out bribery.  It's paid for by  taxpayers and other companies that are not recipients.

    •  What I can't understand (7+ / 0-)

      is why state and local taxpayers put up with it.  Having lived in Ohio for half of my adult life, I've seen this go bad time and time again.  My last town paid retention money (extortion) to DHL to maintain its sorting center there, and then DHL moved out a mere two years later.  These payoffs are almost always a dead loss for the locality coffers, but they can make handsome profits for the local real estate developers who usually dominate city and county government.   Fundamentally, it's a problem of real estate developers, as an industry, discovering that local rulership is of primary importance to their business, and taking it over.  This causes a LOT of the problems we have in everyday life with excess development (infrastructure paid for by taxes, profits to developers, developers either members of the Board or with good friends there), inadequate regulation of industries (the developers sell them the land AND the assurance that they won't be bothered with regulations), and ridiculous prices paid for construction and financing of infrastructure projects (the developers sitting on the Board provide inflated contracts to friends).

      Bottom line: "incentives" to corporations and many other "growth" strategies are really just ploys to increase the private profits of local government members while as usual socializing the costs to the entire neighborhood.  The solution is to adamantly oppose ANYONE running for local office who has ties to the real estate industry.

      •  Business is everything (2+ / 0-)
        Recommended by:
        valion, SilentBrook

        Without it, you have no town, no public services, no police, no fire, no hospitals, no local tax base, no charity, nothing.  Business pays all the bills, all the time.

        Given these realities, encouraging business to locate in your locality is probably a proper function of government. You have to consider local jobs, the income/sales taxes paid by the local workers, and taxes paid by the business to assess the net impact.

        That being said, it is incumbent on local government to actually do the math to determine whether the incentives really are worth it or not.

        (-5.50,-6.67): Left Libertarian
        Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

        by Sparhawk on Wed Jan 30, 2013 at 09:23:35 AM PST

        [ Parent ]

        •  Um (4+ / 0-)

          If you've given the business a tax break to move there, you don't have a local tax base anyway because (by definition) they're not paying any.

          Plus you're probably paying for the additional infrastructure so it's quite likely a net loss.

          Might as well just go all the way and say we should have to pay for the privilege of working.

          If the pilot's good, see, I mean if he's reeeally sharp, he can barrel that baby in so low... oh you oughta see it sometime. It's a sight. A big plane like a '52... varrrooom! Its jet exhaust... frying chickens in the barnyard!

          by Major Kong on Wed Jan 30, 2013 at 11:46:33 AM PST

          [ Parent ]

          •  Re (2+ / 0-)
            Recommended by:
            MPociask, SilentBrook
            If you've given the business a tax break to move there, you don't have a local tax base anyway because (by definition) they're not paying any.
            Their employees are paying property and sales tax, right? And patronizing local businesses like restaurants, who need the business and themselves pay taxes.

            Even if the company pays zero direct taxes, all those indirect benefits are significant, not to mention added jobs for people that already live wherever it is.

            Might as well just go all the way and say we should have to pay for the privilege of working.
            Makes no sense, you would never pay to work.

            (-5.50,-6.67): Left Libertarian
            Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

            by Sparhawk on Wed Jan 30, 2013 at 11:56:37 AM PST

            [ Parent ]

            •  By relying on property and sales taxes (4+ / 0-)

              We're shifting the tax burden completely to the workers - essentially asking them to pay for the privilege of working.

              It's the time tested "Privatize profits, socialize losses" strategy.

              And it's not like these are even high paying jobs any more, because hey someone else is always willing to do it cheaper.

              If the pilot's good, see, I mean if he's reeeally sharp, he can barrel that baby in so low... oh you oughta see it sometime. It's a sight. A big plane like a '52... varrrooom! Its jet exhaust... frying chickens in the barnyard!

              by Major Kong on Wed Jan 30, 2013 at 12:35:02 PM PST

              [ Parent ]

              •  Re (0+ / 0-)
                We're shifting the tax burden completely to the workers - essentially asking them to pay for the privilege of working.
                The tax burden is always on the corporation. It doesn't matter whether the taxes are income, corporate, sales, property, or something else. All dollars in your local community originate with the corporation(s), and those taxes in whatever form contribute to the corporation's cost of doing business in the area.
                And it's not like these are even high paying jobs any more, because hey someone else is always willing to do it cheaper.
                Such is the world we live in. Localities have to cope as best they can.

                (-5.50,-6.67): Left Libertarian
                Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

                by Sparhawk on Wed Jan 30, 2013 at 01:13:20 PM PST

                [ Parent ]

                •  No. (0+ / 0-)

                  Many jobs are government jobs and not dependent on Corporations.  The tax burden is never on the Corporation.  If a Corporation does not include its tax burden in its pricing it will not be in business very long.  Customers pay taxes.

                  •  All government jobs... (0+ / 0-)

                    ...are dependent on corporations on one level or another, from your local parking clerk to President Obama himself. Corporations pay all the freight for all of these people.

                    If your point is 'government jobs' like the post office, they are also supported by corporations, just ones that are further away.

                    (-5.50,-6.67): Left Libertarian
                    Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

                    by Sparhawk on Thu Jan 31, 2013 at 05:44:09 AM PST

                    [ Parent ]

                    •  No. (0+ / 0-)

                      They bill us for the freight.  Corporations do some things that are needed but government does most of what is needed and is difficult or immoral to make a profit off of.  Like building roads, providing health care or running prisons.

                      Corporations are a tool we created; as is government.  You use different tools for different jobs.  Don't use a hammer when you need a screwdriver.

                    •  Corporations answer to stockholders (0+ / 0-)

                      who never live in the local community. The corporations are run for the benefit of absentee 'landlords' who could care less about and provide no support, in taxes or otherwise, for the local community.

                      Less "WAAAAH!", more progress.

                      by IndyGlenn on Thu Jan 31, 2013 at 09:22:38 AM PST

                      [ Parent ]

                      •  Maybe so (0+ / 0-)

                        However, all income to the community in all forms is dependent on them, 'absentee' or otherwise.

                        (-5.50,-6.67): Left Libertarian
                        Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

                        by Sparhawk on Thu Jan 31, 2013 at 09:34:32 AM PST

                        [ Parent ]

                        •  not corporations, businesses (0+ / 0-)

                          A corporation is just one form of business entity, and an arguably poor one. Corporations serve to emphasize and exaggerate every negative characteristic of capitalism. Greed, exploitation, externalizing costs, and so on. They are in many ways the enemy of the community and local citizen.

                          If you want to argue in favor of capitalism, I would not recommend arguing in favor of corporations. They are the worst example of the system, not the best.

                          Less "WAAAAH!", more progress.

                          by IndyGlenn on Sat Feb 02, 2013 at 08:58:37 AM PST

                          [ Parent ]

            •  Wage avoidance (3+ / 0-)
              Recommended by:
              nchristine, MPociask, Laconic Lib

              Note that companies not only get the financial incentives given, but they also use this as a means of union busting as 'right to work' and 'low minimum wages' are the bonus.
              They don't give health care or other benefits so these costs are passed on the the community in costs for health and food-stamps due to the low wages.

              Be the change you want to see in the world. -Gandhi

              by DRo on Wed Jan 30, 2013 at 12:37:55 PM PST

              [ Parent ]

        •  Better than incentives (4+ / 0-)
          Recommended by:
          DRo, MPociask, Laconic Lib, Kevskos

          is for cities, states, and nations to compete on the basis of their infrastructure, workforce (and thus education), etc. But as long as we get a race to the bottom with incentives, governments have less money to put into infrastructure and education.

          That's why I've always argued that competition for investment needs to be regulated, ultimately by the federal government.

  •  Language in the corporate welfare agreement (7+ / 0-)

    should include the payment of a stiff exit penalty for companies that leave, certainly a payment greater than what one usually leaves in a hotel room for the chambermaid.  It could take some of the gypsy out of the souls of corporate vagabonds.

    Building a better America with activism, cooperation, ingenuity and snacks.

    by judyms9 on Wed Jan 30, 2013 at 08:00:24 AM PST

  •  "sheep-stealing" (0+ / 0-)

    Among Christian missionary organizations, frequently there is an agreement to discourage "sheep-stealing" -- trying to grow your own numbers by enticing people over from another church, rather than by new conversions (or re-engagements) of people who are not currently part of any church.

    For me that's the real issue. Is the company creating new jobs, or just moving jobs here from elsewhere, for a net zero? (And will they just pick up and move again if someone else offers them a better subsidy?)

    •  Even with "truly" new jobs, there are (0+ / 0-)

      negative effects on competitors, who eventually shed jobs. We can see this in the auto industry, where states gave subsidies to new, mostly foreign auto plants in the 1980s and 1990s--but for every new assembly plant that opened, an older one closed. Basically, North America already had a glut of cars when these new plants were built.

      The same phenomenon has been beautifully documented in retail in the St. Louis metro area by the regional planning organization, the East-West Gateway Council of Governments. Their report showed that from 1990-2007, local governments gave $2 billion in subsidies to retail, but the retail sector only added a net of 5400 jobs. That comes to $270,270 per job, except the jobs probably would have come anyway due to income growth in the region.

      And of course all those retail jobs disappeared in the recession.

  •  Sounds like (1+ / 0-)
    Recommended by:
    Kenneth Thomas

    retention subsidies = blackmail
    relocation subsidies = bribery
    to me.
    Very, very grifty. Bottom feeders.

    I ‚ô• President Obama and have his back.
    Hands off SocSec, Medicare and Medicaid. NO subsidies to rich Corps.
    Rich pay more, bloated DoD steal less. End war on Afghanistan 01/01/14.

    by OleHippieChick on Thu Jan 31, 2013 at 10:13:31 AM PST

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